Q1 2022 Cboe Global Markets Inc Earnings Call

Good morning, and welcome to the Seawell Global markets first quarter 2022 financial results conference call all participants will be on listen only mode.

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Now, let's turn the conference over to Kathy I'll, Vice President of Investor Relations. Mr. Hill. Please go ahead.

Good morning, and thank you for joining us on our first quarter earnings conference call on the call today, Ed Tilly, our chairman President and CEO will discuss our performance for the quarter and provide an update on our strategic initiatives.

Brian Cho Executive Vice President CFO , and Treasurer will provide an overview of our financial results for the quarter as well as an update on our 2022 financial outlook. Following their comments, we will open the call to Q&A also joining us for Q&A will be Chris Isaacson, Our Chief operating officer, John <unk>, Our Chief strategy Officer, Dave Howson.

Europe and Asia Pacific.

We'd like to point out that this presentation will include the slides that will be showing the slides and providing commentary on each a downloadable copy of the slide presentation available on the Investor relations portion of our website.

During our remarks, we'll make some forward looking statements, which represents our current judgment on what the future may hold and while we believe these judgments are reasonable. These forward looking statements are not guarantees of future performance and involve certain assumptions risks and uncertainties actual outcomes and results may differ materially from what is expressed or implied in any forward looking statements. Thank you.

Refer to our filing with the SEC for a full discussion on the factors that may affect any forward looking statements. We undertake no obligation to publicly update any forward looking statements whether as a result of new information future events or otherwise. After this conference call. During the call. This morning, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials now.

I'll turn the call over to Ed.

Thank you Kevin good morning, and thanks for joining US today I'm pleased to report on strong financial results for the first quarter 2022, and see about global markets, reflecting the continued strength of our business during the quarter year over year, we grew net revenue, 14% to a record $418 million.

Adjusted diluted earnings per share grew by 13% to a record $1 73.

Our solid first quarter results were driven by the ongoing expansion and diversification of our business with strong trading activity in our cash equity business higher volumes and our proprietary index products and increased demand for our suite of data and access solutions, our options business had an outstanding quarter with a strong.

<unk> contribution from our proprietary index products and solid results from our multi listed options business, our proprietary index products resonated well with our customers as volatility continued to remain steadily elevated around the world and market participants engage with our product suite to manage risk.

Average daily volume increased 42% and SPX options year over year with VIX options, increasing slightly year over year and up 18% over the fourth quarter of 2021.

Multi listed options trading Adv increased 2% year over year to a new record of 11 million contracts per day.

Additionally, our European equities segment had a very strong quarter net revenue increased 37% as industry average daily notional value traded increased 31% and market share rose five percentage points year over year to 21, 8% the highest since the first quarter of 2019.

These results were driven by not just favorable market backdrop, but by the expansion of our data and analytics services to help clients improve the quality of their executions and enhance their overall trading experience across our lit and dark order books periodical auctions and see both its Europe .

On the U S equity side, we were pleased to launch periodic auctions at our P Y X exchange earlier this month and hope to replicate the success, we've had with our European periodic auctions offerings.

Turning to Asia Pacific, So you'd want Japan market share increased considerably during the first quarter to three 8% up from two 9% in the fourth quarter 2021, as a result of new liquidity provider program designed to attract new volume to the market.

We are excited to have a growing footprint in Japan, which is the fourth largest equities market in the world by volume trade it.

In Australia volumes remained strong across our equities business and we are also preparing to list Asia Pacific's first crypto Etfs and <unk>, Australia in the coming weeks.

We're excited to be helping to bring these innovative products to market importantly, while achieving strong results. We continue to successfully execute on key initiatives to advance our corporate strategy to innovate integrate and grow our business globally in February we completed the migration of batch now the large.

Just equities alternative trading system in Canada to seaborne technology, creating a unified training experience for all of our North American customers.

Along with this technology migration, we launched Chabot bids, Canada, bringing a new and enhanced block trading offering to the Canadian equities market.

It is important to note that these enhancements are already benefiting from our platform with the migration of match now improving latency and institutional activity increasing with over 10 sponsoring brokers signed on as CMO bids Canada sponsors.

We look forward to further expanding our footprints in Canadian equities market with the expected close of our acquisition of Neo later this quarter subject to regulatory approvals and customary closing conditions.

We also announced plans to migrate to <unk>, Australia to our World Class Technology platform in February 2023, pending regulatory review and approval and released technical specifications for this migration a month ahead of schedule and we appreciate the early engagement with customers in Australia on this important initiative.

And we will be working closely with them throughout the year as they make their preparations for the migration.

As we continue to broaden and evolve our global network gives us the unmatched ability to efficiently scale and expand our business in new ways, both organically and Inorganically as.

As we architect the business for future growth I was incredibly excited to announce several leadership changes last month, including the appointment of David Howson to present, a CFO on May 12.

Many of you know Dave well as he currently serves as president of our European and Asia Pacific segments, and has done a remarkable job working with the team and our customers to successfully grow these businesses.

His track record speaks volumes and he has spearheaded the development and execution of some of <unk>, most innovative products and services data is planning to relocate from London to Chicago and will oversee see Bose business why it's globally. Please welcome Dave as he joins us on the call today.

I believe the enhancements to our management team showcase our deep bench of talent and positions <unk> well to advance our global expansion strategy.

As mentioned last quarter, we are focused on executing on the transformational opportunities we see in three core areas of our business.

And access solutions derivatives and seaborne digital.

We continue to fuel these opportunities by executing against our ongoing strategy, which remains consistent.

Leverage our superior technology.

Further strengthen our core proprietary products.

Increased recurring revenue and expand our product line by geography and asset class.

During the first quarter, we made solid progress advancing each of these core areas of our business.

Let me begin with data and access solutions, which delivered record results during the quarter with revenues increasing 18%.

This growth was driven by continued demand for access to our exchanges proprietary market data and new subscribers to see those front end platforms.

She bow global cloud a cloud based market data streaming service, we launched during the fourth quarter continues to gain traction with customers.

This new service aims to increase access to our unique data set to customers globally.

We plan to further expand the data set offered BSG both global cloud. This summer with the addition of European equities data, which we believe will further expand our customer base accessing our data via the cloud.

We continue to believe this business is positioned incredibly well moving forward given our confidence we are increasing our 2022 targeted organic growth rate for data and access solutions.

8% to 11% from 7% to 10%.

Our unique product set coupled with our geographic and asset class diversification enables us to meet the needs of customers from London to Tokyo, and Chicago to Singapore and everywhere in between.

As the World continues to grapple with uncertainty caused by the war in Ukraine, rising inflation and interest rates and the ongoing challenges with the pandemic market participants have increasingly turned to derivatives and volatility vehicles to help mitigate risk.

We continue to innovate and expand our derivatives business globally to meet this ongoing customer needs by growing 24, five trading in SPX and VIX options expanding our popular SPX weekly's options offering to provide explorations every trading day of the week, starting in may and launching a new smaller sized product designs.

For the retail trader.

Earlier I noted our overall strong volumes across our proprietary products franchise as we continue to see solid momentum trading in SPX and VIX option since launching 24 five trading in November 2021 during.

During the first quarter average daily volume in SPX options during global trading hours increased 164% year over year more than double the volume prior to launch of 24 five.

Additionally, average daily volume in VIX options during global trading hours increased 14% year over year, while VIX futures volumes increased 19%.

Although still in its early days the incremental volume we are seeing as a result of 24 five enhancements has already generated an attractive return on our 2021 investment.

Last week, we added Tuesday explorations to our SPX Weekly's complex and plan to add Thursday explorations beginning may 11th.

These new listings build on the success of our SPX Weekly's, which currently include Monday, Wednesday, and Friday Expiries since we launched SPX Weekly's in 2005, they have become one of the most actively traded products accounting for 70% of total SPX options volume as they allow investors to me.

They're short term U S equity market exposure and execute trading strategies with even greater frequency precision and flexibility.

We have received very positive feedback from a broad range of market participants and we're off to a strong start on Tuesday, we saw over 600000 Tuesday expiring contracts traded.

Last month, we were excited to launch nanos, a first of its kind of options contract designed to make training more accessible for the retail trader.

We have been pleased with initial volumes, which are top 3500 contracts on several days and we plan to continue to expand the network of retail brokers offerings product. We expect this market to continue to flourish over time, and we look forward to engaging with this growing retail segment.

Turning now to Europe , our European derivatives business continues to gain momentum and we are pleased with the progress made since launch last September volumes continued to grow and we reported over 6000 contracts traded in the first quarter and almost four fold increase on last quarter's volumes.

Earlier this week, we launched futures and options on four additional country indices, Italy, Spain, Sweden and Norway.

Second phase of products runs our equity index product suite to cover additional key European markets, providing customers with the tools to efficiently manage their European index exposures.

A single marketplace.

The expansion of our global derivatives franchise is laying a strong foundation to build upon throughout the rest of the year as we help clients around the world navigate risk.

Okay.

Turning now to see both digital and our planned acquisition of Arris Ax, which remains on track to close very soon subject to customary closing conditions <unk> will provide sito with spot trading data and clearing capabilities for digital assets and derivatives trading clearing and data through its regulated.

Futures exchange and clearinghouse. This is a pivotal moment for sito as we reenter the digital asset market and we couldnt be more excited to apply our blueprint of success operating trusted transparent regulated markets to digital assets as we said before we believe <unk> can play a guiding rule and shaping the.

Trajectory of this revolutionary market, we have been actively engaged with regulators as they shape policy for this emerging asset class.

Additionally, the <unk> application for margin Futures is currently in review at CFT C. We look forward to welcoming the Arris X team to see though in accomplishing great things together as you go digital.

We are focused on driving durable growth you would see though and I believe the targeted investments we are making across the ecosystem today not only help us diversify our product set and strengthened our flywheel, but also allow us to enhance the robustness of our revenue growth.

Billy to harvest investments over various periods of time from near term contributors like Tuesday, Thursday, Expiries in 'twenty four five to longer term investments in products like nanos positions <unk> well to grow for years to come and now I will turn it over to Brian .

Thanks, Ed and good morning, everyone. Let me remind everyone that unless specifically noted my comments relate to what you 22 as compared to <unk> 21 and are based on our non-GAAP adjusted results.

As Ed discussed.

The year is off to a very strong start producing the second consecutive record setting quarter foreseeable.

Overall adjusted diluted earnings per share were up 13% on a year over year basis to $1 73, as both the transaction and non transaction elements of our business performed well.

Believe these strong results validate our investment focus as we continue to put capital to work across our ecosystem to help us enable to take full advantage of the favorable market dynamics.

Quickly touching on some of the noteworthy takeaways from the first quarter.

Net revenue increased 14%.

Another quarterly record at $418 million led by the strength in our derivatives markets.

Access solutions category.

I would like to note the change in our income statement to reflect cash in spot market data and access solutions and derivatives markets categories. We laid out at the November Investor Day.

The update reflects how we think about the business in addition to our segments.

Now we won't be reporting our results moving forward.

You can find more details in our 10-Q.

Yeah, I think a couple of highlights for our updated categories in the first quarter derivatives markets produced 18% year over year organic net revenue growth in the first quarter, given the strength of our index business.

Is it access solutions net revenues were also up 18% up 12% on an organic basis helped by strong new subscription and unit growth.

And cash and spot markets produced 5% net revenue growth for the quarter up 2% on an organic basis on the back of strong volumes and market share and our European cash equities business.

Please note that historical quarterly values for these categories covering the 2020 and 2021 time frames are available at our IR site.

Adjusted operating expenses increased 17% to $146 million.

Adjusted EBITDA of $281 million was up 12%.

And last our adjusted diluted earnings per share hit a record $1 73 up 13% compared to last year's quarterly results.

Turning to the key drivers by segment, our press release and the appendix of our slide deck includes information detailing the key metrics for each of our business segments. So I'll just provide some summary thoughts.

We saw impressive year over year growth in many of our segments during the quarter options delivered exceptional net revenue growth of 21% driven by higher trading volumes in both our proprietary and multi listed options.

Our market share as well as higher revenue per contract or RPC and index options.

Total options Adv was up 6% as our higher margin index options volumes increased 27% over <unk> 'twenty one novels.

RPC moved higher by 18% given the continued positive mix shift to index products and a stronger mix of higher priced SPX options in our index business.

And lastly, <unk>.

<unk> benefited from another quarter of double digit growth in market data and access and capacity fees up 26, and 22% respectively as compared to the first quarter of 2021.

North American equities net revenues decreased by 3% year over year against some difficult comparisons to the first quarter of 2021.

Industry volumes were lower by 12%.

Market share declined by 70 basis points versus the first quarter of 2021 on a sequential basis market share improved by a full percentage point and industry Adv was up nearly 20%.

On the non transaction side access capacity fees increased 11% as compared to the first quarter of 2021.

Europe , and APAC segment again delivered outsized growth for the quarter with net revenue up 37%.

The increase was driven by higher volumes and the inclusion of <unk> Asia Pacific revenues of $8 4 million.

Net transaction fee growth of 47%.

Pay solid clearing fee growth of 10%.

Transaction fees.

Let higher IC bow, Europe's equity Adv, increasing 71% year over year, given very strong industry volume growth and a five percentage point increase.

And market share.

Clearing fees benefited from an increase in clearing volumes of 52%.

First quarter revenue increased 2% in the futures segment as transaction and non transaction revenues posted slight gains for the quarter.

Volumes and rate per contract metrics relatively flat year over year.

On the non transaction side access and capacity fees were up 2% and market data grew 25% as compared to the first quarter of 2021.

And finally revenues and the FX segment were up 16% as compared to the first quarter of 2021 net transaction and clearing fees benefited from a 13% increase average daily notional value traded.

And a slight increase in net capture rates.

As noted previously see both data and access solutions revenue growth started the year on strong footing with 18% total growth and 12% organic growth as compared to <unk> 21 again, the strong growth was primarily driven by additional subscriptions and units accounting for over 90%.

Set of the year over year revenue increase as opposed to pricing changes.

More specifically, we saw robust physical and logical port usage at our options and equities businesses driven by increased demand for trading capacity.

The market data side, the equities top of book and options depth of book products continued to perform well.

We look to 2022, we see tremendous potential for the data access solutions business, we are raising our targeted DNA organic net revenue growth rate to 8% to 11% from the 7% to 10% range slightly above the medium term guidance, we delivered at our November Investor Day.

Turning to expenses.

Adjusted operating expenses were approximately $146 million for the quarter up 17% compared to last year.

Excluding the impact of acquisitions owned less than a year adjusted operating expenses were up 12% or $15 billion for the quarter.

Moving to our expense guidance, we are reaffirming our full year expense guidance range of $617 million to $625 million for 2022.

As we have previously stated we expect our expense base to build over the course of this year as we invest behind many attractive initiatives at Tivo.

We expect $23 million to $26 million of the 2022 investment spend to directly drive incremental revenue growth.

We believe that approximately $10 million is needed for infrastructure enhancements to support and scale our business for greater levels of activity in the future.

In the past, we have talked to investment to areas like DNA or our euro CCP acquisition integration as producing solid returns for <unk> I would like to point out that a few of our more recent 2021 investments are already producing some very attractive returns as well for instance, 24 by <unk>.

<unk>, which went live in November is translated to year to date global trading our volumes.

SPX options contract or the doubling 2021 levels, averaging over 27000 contracts per day in the first quarter.

Tuesday explorations went live last week and this Tuesday, we saw over 600000 Tuesday expiring contracts traded a very strong start.

We recognize that each of the investments we made across our ecosystem is unique with different return profiles payback periods and levels of complexity in each case, though we leverage the same core attributes that make seatbelts IBO.

The ability to leverage our superior technology, and unmatched global footprint and a cohesive trading experience across asset classes.

We invest consistently behind this framework so that we can harvest investment across cycles from short term initiatives like 24 by five two longer term endeavors like Euro CCP acquisition you drove this launch introduction of its block trading capabilities in the equities markets and other multi year integration and technology migration.

Activity.

Looking ahead to our pending acquisitions, we expect to close the Arris X transaction very soon subject to customary closing conditions and anticipated midyear closing for Neal also subject to regulatory review and other customary closing conditions.

Adjusting our prior expense framework for the updated timing, we expect the acquisitions of <unk> and neo to add an incremental $30 million to $35 million to our 2022 guided range of $617 million to $625 million.

We continue to anticipate that revenues from Arris.

And Neil will offset more than half of the expenses in 2022.

With an expectation that the additions are EBITDA positive on a combined basis in year two.

The company plans to further refine its guidance for 2022 after the acquisitions close.

Now turning to a summary of full year guidance on the next slide.

Given our early year performance and positive outlooks for the businesses, we are providing incrementally positive updates for the many elements we spoke to at our Investor day back in November specifically as we've already mentioned, we now anticipate DNA organic net revenue growth will be in the 8% to 11% range up from the previous guidance of 7% to 10% acquisition.

Less than a year have performed well and we are slightly increasing our guidance, calling for acquisitions held less than a year to contribute between two and three percentage points to total net revenue growth in 2022 up from our prior guidance of 1% to three percentage points.

Our overall organic net revenue growth target remains unchanged after the first quarter at 5% to 7% for 2022, but we see potential upside to our revenue expectations given the early performance of our growth initiatives and the year to date in macro trading environment.

Depreciation and amortization is expected to be in $40 to $44 million range. Our capex guidance range is <unk> $47 million to $52 million for the full year and we continue to anticipate our effective tax rate on adjusted earnings to be in the 27 five to 29, 5% range for 2022 under the current <unk>.

Tax laws.

Our interest expense for the first quarter of 2022 was $10 $8 million given the incremental borrowing costs related to the financing put in place ahead of the planned acquisition of Arris exit deal, which includes an expanded and longer tenured revolving credit facility. We expect interest expense to be in the range of 14% to $15 billion.

<unk> 22.

On the capital front, our focus has been and remains maximizing shareholder value through the effective use of our capital in the first quarter. We returned a total of $121 million to shareholders comprised of $51 million in dividend payments and $70 million in share repurchases, we remain well positioned to invest in the business support our dividend.

And opportunistically repurchase shares with $249 million in remaining capacity on our share repurchase authorization.

Our leverage ratio increased versus the prior quarter to one six times at March 31st as our debt levels increased with the issuance of a 10 year note and anticipation of our neo in Paris X transactions overall, we remain committed to maintaining a flexible balance sheet and putting capital to work in the most value enhancing way possible.

We're shareholders.

In summary, <unk> kicked off 2022, with very strong footing with a record quarter and we remain confident in the many attractive initiatives, we're investing in across the <unk> ecosystem, we look forward to continuing to deliver strong and sustainable over salts for investors in the quarters ahead, now I'd like to turn it back over.

It to Ed for some closing comments before we open it up to Q&A. Thanks, Brian in closing I'd like to thank our team for the incredible progress made throughout the first quarter.

2022 is off to an exceptional start and with the help of our dedicated associates, we are well positioned to define markets globally delivering value to our customers and shareholders.

At this time, we'd be happy to take your questions.

We ask that you. Please limit your questions to one per person to allow time to get to everyone.

Free to get back in the queue and if time permits we'll take a second question.

Thank you.

At this time, we will begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

If youre using a speakerphone please pick up your handset before pressing the keys.

Your question. Please press Star then two.

This time, we will pause momentarily to assemble the roster.

And the first question comes from Rich Repetto with Sandler O'neill.

Yeah, Good morning, Ed and Brian and Chris.

So I guess my question is on the proprietary products and the big speeches Bard and <unk> seen a rebound.

Since sort of the mid quarter first quarter slowdown you know Ah ha I guess, that's due to the Barclays. The Bx X E. T F issuance issue, but I guess could you give us an update on the recovery in the VIX futures and more broadly in the proprietary product volumes like you talked of.

What about index options and see great growth.

Can you give us a picture of what's happening and what's in your control what do you think it's volatility Griffith.

Cool Thanks, Rich a big question there in a really good one a lot of it at the heart of it's really the macro trading what's going out more bad really about Brian why don't we start an empty.

More rich as you got another question with Barclays and VX ex E T J yeah. Thanks rich.

The as we look at that and you did point that out as far as the timing as far as mid March goes with the Barclays announcement, and just to get to to make sure. All the St pages that they've decided themselves that they intend to file a new automatic shelf registration statement with the SEC as soon as practical and they remain committed to structured products and business in the U S.

We've seen that where there is no reason for us to believe that if I can be the case and obviously in the interim we've also seen a.

New funds come into that space as well from an ATM perspective, thanks, Bryan So rent I mentioned, maybe we'd probably look at you know what's in our control upside out of control is a good way to look at the volumes.

So they are solid across asset class.

And we are in a sustained level of higher volatility if we use the historic.

The level of VIX, and it's really the macro known as being the key drivers you know interest rates are rising inflation warranty crane supply chain as a result of the continued COVID-19 issues, primarily in China, all not in our control the mix of our products continued to be driven primarily.

<unk> by the relationship of implied versus realized volatility very similar story to what we talked about last quarter when implied vols are below realized.

Our users are buying optionality and exposure and protection cheaper than the underlying is moving so long gamma is paying off with large intraday moves again not in our control.

Customers continued to be very active around short dated options and optionality that they provide a guy. This is customer driven we're watching what they trade not in our control. So what is it that we can control well its design its development and the extension of the access to the complex. So we listened to <unk>.

Customers, they want more access and more precision around trading and went that axis come certainty and confidence in our platform with round the clock access to liquidity. So we added 24, five for SPX and VIX options.

We've been sharing with you again in the amount of interest in Super short dated options. So we added Tuesday options and soon to add Thursday, we added a curb session.

We're almost done in launching our new really a new design trading floor to accommodate more interest for in person trading, giving more access to global liquidity.

And we launched the contract designed for our retail and the National contract, which provides access to the S&P 500. So in our control is really expansion at access and listening and that's I guess the punchline.

Thanks for that question rich.

Got it that's very helpful. I was going to ask about the extent of the conservative expense guidance, but that's all thanks.

Wow.

I'll, let you get back in queue rich.

I'm sure someone else will ask [laughter].

Okay. Thank you and the next question comes from Dan Fannon with Jefferies.

Thanks, Good morning.

I wanted to follow up on the axis and data are strengthening the improved guidance. So you talked about increased demand for capacity, but curious about incremental customer with the type of customer and maybe what you're seeing on the retail side, if you've really tapped into what that opportunity could be in terms of incremental demand.

Sure I'll take that bridge, the I'm, sorry, and sorry can the AR as we think about all the elements.

DNA growth and and I really want to touch them. All it's it's it's not direct retail per se, but retail can be behind a lot of those trends as far as where we're seeing that data is providing information to the cash and spot markets to the derivatives markets. So it's it's underlying that is a part of that but we don't see that.

Directly coming in.

Her say, but it is certainly driving the you know it's exciting it's driving some of that transaction volume is certainly driving that real time data and real time access. So you know as far as where those customers and we look at where that new growth is and we look at that composition of that new revenue.

<unk> seen the largest part.

Coming outside of North America about 40 to 40% to 42% we saw with North America, and the rest was EMEA and APAC and which we love those numbers because it's.

Hitting the growth of where we are today, but it's also highlighting the we think more significant upside of it's it's still barely scratching the surface of APAC. For example, that's kind of the smallest component of the growth. We see so we look at it more geography and what we can do there are and so and we're really excited when we think about it.

Incremental cloud offerings that we have coming online and we think about the incremental.

You know risk and market analytics information that we're seeing that we're putting together and where that growth is coming from both a mix of new as well as incremental share of wallet. So again, we continue to be very excited about where that is in those offerings that again across the globe.

Thank you.

Thank you and last question kind of gone solved with credit Suisse.

Yeah.

Thank you.

Good morning. Thank you for taking my question can you. Please.

Speak to the extent that CBO European derivatives is easing structural challenges and market fragmentation that slowed European options volume growth and also given the initial momentum of that business is there upside to the 25 million euro revenue growth by 'twenty 'twenty four outlook.

Dave Dave Allison and welcome to the call.

Thanks, very much and thanks very much for a great question certainly in terms of the summary that the value proposition and the <unk> the <unk>.

The macro factors that are in place. So we're in place two years ago, when our customers came to us with.

The idea of any opportunity, you're breaking into and really growing the European equity derivatives market and we looked at that that fragmentation. The silo ing across Europe , we looked at the need for a single stop shop and also that need for an on screen lit a liquid market very much in line with what we enjoy all about pistol.

They enjoy in in the U S.

With the acquisition of your C. C. P. We're able to bring that all together the single trading single margin pool.

Ross country benchmarks in a pan European benchmark, so really giving that single access point and that would increase the efficiency through our products designed from the ground up and these products based of indices.

It all based off all equities market prices and as you heard in the in the prepared remarks that the European equities market share has grown 500 basis points over the last year, so really solidifying the products that trade on those venues.

What we've seen since launch last year is a continuation of that commitment from the initial round of customers with Q1 being four times.

The size in terms of trading from Q4 last year, the new products. We launched this week has gone well with good support really crucially with those new products now we get to access different national benchmarks across Europe , and therefore, new new.

A new local customers and even local expertise what are you going to see really from here now as for the build out of the the futures patriot across the products. The price picture there followed by the options, but also a greater engagement as we look through to next year and the addition of single single names and really with this other guy.

We've given them the revenues that we're when we're looking at really are on a good path as we build out this product and this initiative.

Besides the opportunity is it still the the window between European and U S. Smokeless he's still there and we really are looking for depending on building this out without systems.

Yeah.

Got it thank you.

Thank you and the next question comes from Alex Kramm with UBS.

Okay.

Yeah, Hey, good morning, everyone.

You may have talked about this before but just a quick one on the <unk> on the new initiatives on the price of your products the.

After hours trading the new weeklies can you just remind us what the pricing strategy is there right. Now are there are there any incentives that you're providing or oh, how does how does pricing generally compare so we can have an idea of how they might flex your RPC as as these businesses hopefully grow faster than our than the traditional.

Offerings.

Yeah.

There's no there's.

There's no difference in pricing I mean, there's so you won't see any any mix from these products that you're saying that's going to have any impact other than having a call. For example, a higher mix of SPX contracts in our overall mix of options.

But it's not going to be we're going to charge incrementally more during let's say that our global trading hours session versus regular trading hours session.

Okay, and so there's there's never been a contemplation for kind of like I think other markets. When they have global access usually those fees, a little bit higher but not not not really something that youre contemplating or doing no.

No. We don't think it's that type of market build per se, you'll see that when we've watched other new products or new markets. For example, when we've done with European derivatives, there will be some say certain liquidity.

You know our incentives in place or when we rolled out various you know call. It high box futures, we will do that with the new products, but here, it's a little bit of a different type of rollout here with the initiatives you've talked about here with SPX.

Fair enough. Thank you.

Thank you and then that's that's where costs are all in line with Oppenheimer.

Good morning, and thank you for taking my question. So on D&A you started there yet 12% organic growth you raised your guidance, but the growth is still higher than the high end of your guidance range and you keep investing in this area. So what are we may concern you with that the growth may slow down.

For the rest of this year and then additionally, when you continue to expand into Europe .

How can DNA potentially benefit from that I mean, if you can talk about the progress of offering to and now that the spot ups to your European clients that would be great. Thank you.

Sure I'll start with that and it isn't so much of a slowdown for the progress that we see this year. We you know you've got a pretty good view into or a particular pipeline on the global agencies work and contracts, we see on the queue, there and the various initiatives that we have going on.

I would say if you look at it.

It's kind of a silly answer, but if you look at the map of the comparisons that you see how we ramped up 2021 growth in this area. If you look at for example, the consecutive growth rates quarter over quarter and 21, you know Q2 had a 2% growth rate over Q1, and again I'm talking about 'twenty. One here if you look at Q3.

It actually got a 7% growth rate over the two Q and then you look at our Q4 and then it had a 4% growth rate on top of that so you've seen a continuous momentum build.

We started out 'twenty, one with a run rate of alright.

Amount of call it $99 million per quarter, and we exited at $112 billion.

For the fourth quarter. So you can see that really nice ramp up so as we see our growth and we've been able to continue that ramp into Q1, and we do have some plans in place. So just more naturally we're just going to see a little bit more flattening out of that higher growth rate as we move into Q2, three and four relative to the.

Comparison of last year and as you look at how do we continue to.

Create the wins are across the globe. This goes back to.

The benefits of the flywheel, what we're doing our global network and as we build out our people as we build out.

The sales force and as we continue to build out our I'll call. It market share volumes that continues to build off of each other going back to the long term benefit of our flywheel of seeing how they interrelate, but if you look at the particular risk and market analytics I'm the biggest.

Growth driver I mentioned earlier to a previous question was is that.

The growth we have had so far has it been more of a increase share of wallet versus new customers. So we're really excited about bringing that offering to new geography geographies as we continue to add more sales capacity and capability to the different geographies that we are at that we are in.

Yeah.

Got it thank you very much.

And certainly I can chime in a little bit more on the European opportunity. It it's multifold.

Again first principles, you've got the European market share, 21% Monkey shelf is richer more deeper and deeper data set to look into for local customers in global system has taken the European equities data, but Moreover, it's the sale of the U S data set to see buy one product sets that we've got which provide.

The real opportunity and to see if these CFT provide us retail providers in Europe , and EMEA and Asia Pacific and then when you also think about the RMA product say see bow Europe derivatives bases, a lot of the theoretical options prices used off the highway.

C O options prices do we get there. So we see a lot of opportunity in Europe for providing value add pre trade at trade and post trade risk management and analytics services and then as you think further eastwood's Oh, we can look at Australia, and Japan, where we see strong non transaction revenues coming out of the call.

All venues that with for example, Australia is non transaction revenue increased over 30% compared to quarter one last year.

Got it thank you very much.

Thank you and the next question comes from Brian Bedell with Deutsche Bank.

I mean folks maybe if I can sneak a two parter here one for Brian and one for Dave Brian just on the on the revenue guidance you did say and you heard in the comments in the release about there being potential upside.

To the revised our revenue growth targets, maybe can you just sort of frame.

Frame, whether that's something that would interest this guidance up every every quarter potentially in and Hum you know more importantly is that more based on <unk>.

Global macro market volatility or rather the performance of your growth initiatives.

And then just one for Dave.

On the European consolidated tape, just any kind of view on that that's a project obviously that's been talked about for many many years.

I would think see but it was in the best position to offer that maybe any kind of initial thoughts on that and creating a more concentrated data solution for Europe .

Oh. Thanks, Good question and I will just continue to reiterate that if the macro environment does stay the same.

There's a lot of confidence that we will exceed that 5% to 7% organic.

Net revenue.

Grocery and targeted growth rate.

And what you'll see in this environment is not only due to the I'll call. It the comps, particularly with a strong first quarter last year and the various asset classes. If they do actually see a positive growth across all of our asset classes over the prior year, which has got a really contributed and again most strongly we saw that in.

And then the index and the options so.

The really the honest answer to your question is is it kind of depends as far as the quarter as far as the full year and how we entered that up as we continue to gain confidence do.

Look we're excited about the early numbers, we're seeing around 24 by five we're excited about the very very very early you know Tuesday Thursday at what we see going on there that's encouraging so as we continue to see that traction you know if things continue to go well could there be a inch up with guidance into Q1 next time, we have this call.

Certainly and we'd have a obviously a better visibility to the full year as far as the really strong traction we're seeing with those organic initiatives and then continuing views of the macro environment.

And then Dave I think you can pick up the second part of that.

Absolutely yeah, you're spot on that we are in fact take supporters of a consolidated tape.

Introduction into the European environment, we strongly believe in a single in basketball tradable, a pan European environment as well as the U K market now post Brexit. We think this will give palpable on real benefit to and invest as we've seen the benefits from the.

It sits in the United States, and certainly think our investors deserve that in the European environment key aspects and I could go on for an hour, but I will say to you that although.

Although we include pre trade as well as post stride in this consolidated tape and it be outfit them at a reasonable reasonable commercial basis with a good eye.

Good on a revenue share model most of the way, we see things operating in the United States. We like many others are placed well to be a consolidated tape provider as you point out because we do ingest and much of the data globally and we also happen to run the largest trade people.

Thing a facility in Europe with about eight 5% market share that so well placed but we're heavily engaged in the debate as things unfold with our system is on the policy.

We will keep the a C.

The market with us with that progress.

That's great color I appreciate it and welcome looking forward to hearing more comments on Europe and in the future from you think Steve.

Thank you.

And the next question comes from Kai what with K B W.

Hi, good morning.

Mentioned that 90% of the growth in data and access is really driven by additional subscriptions and these incremental units.

Just given that there's been some heightened investor focus on retail traders may be beginning to disengage a bit from the highs. We saw last year. Just curious if we would see a meaningful pull back and kind of industry volumes across your key markets. Do you think that would would you know we'd see demand for ports or knee and it's kind of slow meaningfully.

<unk> from the current levels or has this been driven by bye bye no more secular or other trends. Thanks.

Yeah, I would say it's.

It's primarily for I'd say, it's probably a mix of both and it's hard sometimes to disentangle. The two and I can tell you what we've seen more historically.

It's it's we're continuing to look at this question and absolutely as we put together a forecast in this guidance.

We knew there were some elements of that port revenue that is a bit volume driven but we also know it's.

Maintaining capacity for future periods that rarely do we see people pull back on the level of imports, particularly when we know that when investors and our Edwin.

Our clients when they are in these markets how they make money they tend to make money in those highest volume those highest peak those highest volatility at a time and not having that capacity is critical to their overall P&L. So rarely do we see them pull back on some of that now there's a couple of of of of I'll call. It the pricing dynamics were.

Some of that volume.

They pulled back a little bit of that but like I said, we tend to see that as more broadly infrastructure.

And the other base of I'll call. It revenues that we're building within DNA or beyond just obviously, the real time and access and they and their risk and marketing analytics and the overall indices that we continued to build out which frankly those are actually well the smallest parts of our overall DNA next they are there.

Hi, its growth from a percentage standpoint, so again, we'll see that hopefully play out over time, but.

Back to your original question at the heart of it is it's.

It's a little bit of both but we see it historically had been pretty sticky.

And I'll just call. It just mentioned there as well, we rarely see port poor counts come down our unit counts come down as the messaging traveling across our markets continues to grow our.

Regardless of retail engagement or not as that may have a flow.

Messaging volumes continue to go to go north that's the direction they've gone for for decades really.

I'll just mentioned as well you know DNA.

Bussiness or was I think a lack of risk even if retail engagement may ever flow is it.

Yeah, they tend to use less messaging traffic, which is really where the capacities is focused and so the market, making community as the other institutions. So there's been a a cycling and institutional volume with a higher volatilities.

Do you expect to see demand very very strong across our products and our markets for access and data and I'll mention as well again see what global cloud.

We really really getting after our new user there in different jurisdictions, but using that data across our network. So we think that's durable also.

Great. Thank you very much.

Thank you and the next question comes from micro Cypress with Morgan Stanley .

Hi, Good morning. This is Stephanie on for Mike I, just have a follow up about the progress you've made around 24 five.

First if you view the next steps as moving towards 24, seven what are your thoughts around that and what trends are data points will you be watching to give you confidence if you were to extend to 24 seven.

Well of course, you can handle I think the technology aspect of that I think really when we look to expansion at access. This this is really primarily been in the institutional side and we know that there's growing interest for raw.

The clock access as retail base grows as well. So we think we've got the right product set and then theres a readiness of from our introducing brokers odd whether or not to provide access to customers. So that debate going on not just at <unk> level I would say that we've proven.

That we are ready from a technology perspective, but really accommodating our customers is key again back to my opening remarks. This is about listening.

In delivering on demand, but Chris as far as any further expansion on the clock.

Yeah, absolutely. So I think it's a great question, Yeah, we were customer driven company here, we as customers bring us demand for for access to markets, we will listen to that demand and it provide at 24 five is a great example that even the curb session launched this week.

<unk>.

I will remind you so as we look forward to closing the transaction for Arris ex that already trades 24 by seven also mentioned that we're expanding our index platform from 24 five to 24 seven this year, that's part of one of our strategic projects.

They claim that the DNA team.

As our customers and the investing community wants more access more and more around the clock will provide that when the demand is there.

Yeah.

Great. Thank you.

Thank you and the next question comes from Alex Blaustein with Goldman Sachs.

No.

Hey, good morning, Thanks, everybody for taking the question. So I was hoping to dig into areas, Texas would be a little bit more I guess first an easy one maybe just kind of walk us through the sources of lower expenses that you guys expect from both of those for the rest of the year and then more importantly bigger picture as you're thinking about integrating these assets over the next two years can you provide us with a road map.

Sources of revenues to <unk>.

Getting these kind of products with the profitability, so sort of like what's kind of the low hanging fruit over the near term and what needs to go really well for you guys to potentially meet or exceed expectations.

Great question, why don't we start Brian Arris action deal effect on expenses, Chris <unk> likely closing before Neal and the very soon category.

And then we can move on to Neal Yeah, Alex the.

Good questions as far as when we could take it just would've dates are there lines. We could go on hours as far as what our plans are for growth for these but I'll I'll try to be brief here as we've laid out in our guidance as far as what we expect the expense impact to be a.

To obviously are our P&L for this year and then I'll call. It that are kind of the EBITDA contribution when you roll that in.

And so that's been it's been more about it's not so much an expense story is that continuing to grow their revenues and particularly around the digital side and I'll, let Chris talk a little bit more about that about our growth plans, there specifically and then around neo.

With respect to that has a wonderful growth trajectory and what we're seeing year over year growth similar.

Similar to what Dave mentioned.

And the C. Both Japan and see both Australia, and what that has done for us organically even post acquisition.

As far as even though there's no comp to last year, that's been our own P&L. So we see Neal playing a very important role as far as growing the revenue synergies within what we're doing around our existing Canadian operations are broadly north American operations around that listings franchise.

That I think I'll turn it back to Chris.

Chris or for Arris.

Alex we're really excited about closing this transaction very soon remind I remind you that we are we with the one transaction.

We get a spot trading platform data derivatives and clearing and as you think about the opportunities for revenue there as we we scale. It and you know it worked for the syndication with industry partners are spot trading we're looking to add a new new coin listings as soon as we can.

Can you talk about data build the spot platform and there can be data that comes off of that.

<unk> margin futures, we have a margin futures application before the C. F. P C.

Just on F. C. M. So we look forward to growing that derivatives business.

Then clearing is maybe something that's not as focused on but a real key asset that we get with her sex.

As we think there may be some bilateral relationships that maybe some of those trades can be cleared over time, it's a it's a real asset for us to grow there. So there could be clearing revenues also so very excited about this transaction.

Deeply engaged also in the digital asset regulation conversation right now that's very active we are we want to help lead that discussion with many others and helped us.

This new asset class grow and mature and in a great way. So we can operate these markets and you know trusted regulated transparent way as we do the rest of our markets and with that I'll hand, it to Dave to cover Neal.

Yeah, great, Thanks, Chris and and as a reminder of course, we already have a foothold in Canada would match now and enjoyed the migration in February to see both technology and the introduction of Cebu bids, Canada really opening is opening up the bids network that two Canadian investors and to investors around the world to invest.

In Canada, and vice versa. So with knee are super excited about a number of things the the different trading mechanisms at neo bring to the policy as we consolidate all place and in the Canadian competitive landscape in those different trading protocols really bring a new diverse customer set.

Two the existing set we and welcome.

Welcome and to match now today, you said that the trading mechanisms then there's less things are at least things near 221 Etfs on 56 culprits are couple of debentures in those Canadian depository receipts, a great level of innovation already there and really that gives us a great blueprint to think about how we can expand.

And listings offerings around the world, We've got over 640 <unk> fees already but then how do we how do we think about our listing strategy and on top of that global Securities network that we've been being able to build out low hanging fruit Cebu one Canada is the day to put it will be bringing out.

So the additional the additive effect of Canadian data, including these unique listings that neo enjoys onto our data products and then later on those data products into the cloud. So you see that the repeating repeating patterns here I'm really looking forward to getting going with the near team as we progress towards.

Our clothes, which is going according to plan.

Great very helpful. Thank you.

Thank you and then ask questions a follow up with Alex Kramm with UBS.

Hey, Thanks, again, sorry for dragging up the call just one quick follow up on all the data and access our questions earlier.

You don't you don't disclose I don't think retention rates like many of the other data companies in the space too. So can you maybe just give us an updated hub where retention is and how that's been trending and when it comes to cancellations, maybe what customer types of products, you're seeing the biggest cancellations and and and why thanks.

Alex We don't I think we can look to potentially enhance that disclosure as far as looking at as far as where we are but right now I'll tell you just as a very very high level is that some of the growth that we've seen and we are we indicated this last year.

On our call and when we saw some of the higher growth rate is that with actually seen fewer cancellations than what we had traditionally model. So we have to say, it's a fairly positive story and we've been more focused on the continued.

Call, it new and ads and we've seen your cancellations.

Than we've seen historically call. It you know pre pandemic, so positive trends there, but again, we'll we'll look for that disclosures are again, we'd like to evaluate that.

Metrics and items that Ah can enhance oh call it from the Investor information.

And.

So you know where are you seeing the biggest cancels just so we have an idea I know it seems to be very small, but just just curious where there's the most turnover at the book of business I guess.

Yeah, No I think we will just I'll defer and wait until I have the firm data there from from the team.

It sounds good the color was helpful. Thank you.

Sure.

Thank you.

What's the last question I would like to return to afford a management for any closing comments.

Right so that completes our call for today. Thank you so much for your time and interest in the company. Thank you.

Thank you.

France has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.