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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided to assist the reader in understanding the results of operations, liquidity and capital resources, and critical accounting estimates and policies through the eyes of our management team. The following discussion should be read in conjunction with the consolidated financial statements of the Company and the notes thereto included in Item 8 of this Annual Report on Form 10-K. The following discussion contains forward-looking statements. Actual results could differ materially from the results discussed in the forward-looking statements. See “Risk Factors” and “Forward-Looking Statements” above.

A detailed comparison of the Company’s 2021 operating results to its 2020 operating results can be found in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in the Company’s 2021 Annual Report on Form 10-K filed February 18, 2022 at www.sec.gov.

INTRODUCTION

Management’s Discussion and Analysis of Financial Condition and Results of Operations is organized as follows:

EXECUTIVE SUMMARY

Overview

Cboe Global Markets, Inc., a leading provider of market infrastructure and tradable products, delivers cutting-edge trading, clearing and investment solutions to market participants around the world. The Company is committed to operating a trusted, inclusive global marketplace, and to providing leading products, technology and data solutions that enable participants to define a sustainable financial future. Cboe provides trading solutions and products in multiple asset classes, including equities, derivatives, FX, and digital assets, across North America, Europe, and Asia Pacific.

Cboe’s subsidiaries include the largest options exchange and the third largest stock exchange operator in the U.S. In addition, the Company operates one of the largest stock exchanges by value traded in Europe, and owns Cboe Clear Europe (rebranded from EuroCCP in November of 2022), a leading pan-European equities and derivatives clearinghouse, BIDS Trading, a leading block-trading ATS by volume in the U.S., MATCHNow (operating as TriAct Canada Marketplace LP), a leading equities ATS in Canada, Cboe Australia, an operator of trading venues in Australia, and Cboe Japan, an operator of trading venues in Japan. Cboe also is a leading market globally for exchange-traded products (“ETPs”) listings and trading. On May 2, 2022, Cboe completed its acquisition of ErisX, subsequently rebranded to Cboe Digital, an operator of a U.S. based digital asset spot market, a regulated futures exchange, and a regulated clearinghouse. On June 1, 2022, Cboe completed its acquisition of NEO Exchange Inc. (“NEO”), which is a recognized Canadian securities exchange.

The Company is headquartered in Chicago with offices in Amsterdam, Belfast, Hong Kong, Kansas City, London, Manila, New York, San Francisco, Sarasota Springs, Singapore, Sydney, Tokyo and Toronto.

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Recent Developments

Acquisition of Cboe Digital

On October 20, 2021, the Company announced it entered into a definitive agreement to acquire ErisX, which was subsequently rebranded Cboe Digital. Cboe Digital operates a U.S. based digital asset spot market, a regulated futures exchange, and a regulated clearinghouse. Ownership of Cboe Digital allows the Company to enter the digital asset spot and derivatives marketplaces through a digital-first platform developed with industry partners to focus on robust regulatory compliance, data and transparency. The transaction closed on May 2, 2022.

Acquisition of NEO

On November 15, 2021, the Company announced it entered into a definitive agreement to acquire NEO. NEO is a fintech organization that is comprised of a fully registered Canadian securities exchange with a diverse product and services set ranging from corporate listings to cash equities trading and a non-listed securities distribution platform. With ownership of NEO, the Company expects to further grow Canada as a hub for global equities trading and listings. The transaction closed on June 1, 2022.

Business Segments

The Company previously operated five reportable business segments prior to the quarter ended June 30, 2022. As a result of the Cboe Digital acquisition during the quarter ended June 30, 2022, the Company operates six reportable segments: Options, North American Equities, Europe and Asia Pacific, Futures, Global FX, and Digital, which is reflective of how the Company's chief operating decision-maker reviews and operates the business, as discussed in Note 1 (“Nature of Operations”). Segment performance is primarily evaluated based on operating income (loss). The Company’s chief operating decision-maker does not use segment-level assets or income and expenses below operating income (loss) as key performance metrics; therefore, such information is not presented below. The Company has aggregated all of its corporate costs, as well as other business ventures, within the Corporate Items and Eliminations totals based on the decision that those activities should not be used to evaluate the operating performance of the segments; however, operating expenses that relate to activities of a specific segment have been allocated to that segment.

Options. The Options segment includes options on market indices (“index options”), as well as on the stocks of individual corporations (“equity options”), and options on ETPs, such as exchange-traded funds (“ETFs”) and exchange-traded notes (“ETNs”), which are “multi-listed” options and listed on a non-exclusive basis. These options are eligible to trade, as applicable, on Cboe Options, C2, BZX, EDGX, and/or other U.S. national security exchanges. Cboe Options is the Company’s primary options market and offers trading in listed options through a single system that integrates electronic trading and traditional open outcry trading on the Cboe Options trading floor in Chicago. C2 Options, BZX Options, and EDGX Options are all-electronic options exchanges, and typically operate with different market models and fee structures than Cboe Options. The Options segment also includes applicable market data fees generated from the consolidated tape plans, the licensing of proprietary options market data, index licensing, and access and capacity services.

North American Equities. The North American Equities segment includes listed U.S. equities and ETP transaction services that occur on fully electronic exchanges owned and operated by BZX, BYX, EDGX, and EDGA, equities transactions that occur on the BIDS Trading platform, and Canadian equities and other transaction services that occur on or through the MATCHNow ATS, and NEO, as of the June 1, 2022 acquisition. The North American Equities segment also includes listing services on NEO Exchange, ETP listings on BZX, the Cboe Global Markets, Inc. common stock listing, applicable market data fees generated from the consolidated tape plans, the licensing of proprietary equities market data, routing services, and access and capacity services.

Europe and Asia Pacific. The Europe and Asia Pacific segment includes the pan-European listed equities and derivatives transaction services, ETPs, exchange-traded commodities, and international depository receipts that are hosted on MTFs operated by Cboe Europe Equities (Cboe Europe and Cboe NL equities exchanges) and Cboe Europe Derivatives (“CEDX”). It also includes the ETP listings business on RMs and clearing activities of Cboe Clear Europe, as well as the equities transaction services of Cboe Australia and Cboe Japan, operators of trading venues in Australia and Japan, respectively. This segment was previously referred to as the European Equities segment but was updated to the Europe segment in the first quarter of 2021 as a result of the launch of Cboe Europe Derivatives, a pan-European derivatives platform in September 2021. The segment was subsequently updated to Europe and Asia Pacific to reflect the acquisition of Chi-X in July 2021. Cboe Europe operates lit and dark books, a periodic auctions book, and Cboe BIDS

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Europe, a Large-in-Scale (“LIS”) trading negotiation facility for UK symbols. Cboe NL, launched in October 2019 and based in Amsterdam, operates similar business functionality to that offered by Cboe Europe, and provides for trading only in European Economic Area (“EEA”) symbols. The new Cboe Europe Derivatives venue offers futures and options based on Cboe Europe equity indices. This segment also includes Cboe Europe, Cboe NL, CEDX, Cboe Australia, and Cboe Japan revenue generated from the licensing of proprietary market data and from access and capacity services.

Futures. The Futures segment includes transaction services provided by CFE, a fully electronic futures exchange, which includes offerings for trading of VIX futures and other futures products, the licensing of proprietary market data, as well as access and capacity services.

Global FX. The Global FX segment includes institutional FX trading services that occur on the Cboe FX fully electronic trading platform, non-deliverable forward FX transactions (“NDFs”) offered for execution on Cboe SEF and Cboe Swiss, transaction services that occur on the electronic trading system for U.S government securities executed by Cboe Fixed Income, as well as revenue generated from the licensing of proprietary market data and from access and capacity services.

Digital. The Digital segment includes Cboe Digital, an operator of a U.S. based digital asset spot market and a regulated futures exchange, and Cboe Clear Digital, a regulated clearinghouse, as well as revenue generated from the licensing of proprietary market data and from access and capacity services.

General Factors Affecting Results of Operations

In broad terms, our business performance is impacted by a number of drivers, including macroeconomic events affecting the risk and return of financial assets, investor sentiment, the regulatory environment for capital markets, geopolitical events, tax policies, central bank policies and changing technology, particularly in the financial services industry. We believe our future revenues and net income will continue to be influenced by a number of domestic and international economic trends, including:

● consolidation and expansion of our customers and competitors in the industry;

A number of significant structural, political and monetary issues, global conflicts and global pandemics continue to confront the global economy, and instability could continue, resulting in an increased or subdued level of inflation, market volatility, supply chain constraints, changes in trading volumes and greater uncertainty. Inflationary increases in our expenses, such as compensation inflation, and increased costs related to CAT may have an adverse effect on our financial results.

Components of Revenues

Beginning in the first quarter of 2022, the Company updated the financial statement captions within its consolidated statements of income to better reflect the Company’s diversified products, expansive geographical reach, and overall business strategy. The changes do not have a financial impact on the Company’s reported revenue, revenues less cost of revenues, reported net income, or cash flows from operations.

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The components of revenues which include the above changes are described below:

Cash and Spot Markets

Revenue aggregated into cash and spot markets includes associated transaction and clearing fees, the portion of market data fees relating to associated U.S. tape plan market data fees, associated regulatory fees, and associated other revenue from the Company’s North American Equities, Europe and Asia Pacific, Global FX, and Digital segments.

Data and Access Solutions

Revenue aggregated into data and access solutions includes access and capacity fees, proprietary market data fees, and associated other revenue across the Company’s six segments.

Derivatives Markets

Includes associated transaction and clearing fees, the portion of market data fees relating to associated U.S. tape plan market data fees, associated regulatory fees, and associated other fees from the Company’s Options, Futures, Europe and Asia Pacific, and Digital segments.

Components of Cost of Revenues

Liquidity Payments

Liquidity payments are directly correlated to the volume of securities traded on our markets. As stated above, we record the liquidity rebates paid to market participants providing liquidity, in the case of C2, BZX, EDGX, and Cboe Europe Equities and Derivatives, and Cboe Digital, as cost of revenue. BYX and EDGA offer a pricing model where we rebate liquidity takers for executing against an order resting on our book, which is also recorded as a cost of revenues.

Routing and Clearing

Various rules require that U.S. options and equities trade executions occur at the NBBO displayed by any exchange. Linkage order routing consists of the cost incurred to provide a service whereby Cboe equities and options exchanges deliver orders to other execution venues when there is a potential for obtaining a better execution price or when instructed to directly route an order to another venue by the order provider. The service affords exchange order flow providers an opportunity to obtain the best available execution price and may also result in cost benefits to those clients. Such an offering improves our competitive position and provides an opportunity to attract orders which would otherwise bypass our exchanges. We utilize third-party brokers or our broker-dealer, Cboe Trading, to facilitate such delivery. Also included within routing and clearing are the Order Management System and Execution Management System (“OMS” and “EMS”, respectively) fees incurred for U.S. Equities Off-Exchange order execution, as well as settlement costs incurred for the settlement process executed by Cboe Clear Europe and Cboe Clear Digital.

Section 31 Fees

Exchanges under the authority of the SEC (Cboe Options, C2, BZX, BYX, EDGX, and EDGA as well as CFE to the extent that CFE offers trading in security futures products) are assessed fees pursuant to the Exchange Act designed to recover the costs to the U.S. government of supervision and regulation of securities markets and securities professionals. We treat these fees as a pass-through charge to customers executing eligible listed equities and listed equity options trades. Accordingly, we recognize the amount that we are charged under Section 31 as a cost of revenues and the corresponding amount that we charge our customers as regulatory transaction fees revenue. Since the regulatory transaction fees recorded in revenues are equal to the Section 31 fees recorded in cost of revenues, there is no impact on our operating income. Cboe Trading, Cboe Europe, Cboe NL, BIDS, MATCHNow, Cboe FX, Cboe Australia, Cboe Japan, Cboe Digital, and NEO are not U.S. national securities exchanges, and accordingly are not charged Section 31 fees.

Royalty Fees and Other Cost of Revenues

Royalty fees primarily consist of license fees paid by us for the use of underlying indices in our proprietary products usually based on contracts traded. The Company has licenses with the owners of the S&P 500 Index, S&P 100 Index and certain other S&P indices, FTSE Russell indices, the DJIA, MSCI, and certain other index products. This category also

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includes fees related to the dissemination of market data related to S&P indices and other products through Cboe Streaming Market Indices (“CSMI”).

Other cost of revenues primarily consists of interest expense from clearing operations, electronic access permit fees and other miscellaneous costs associated with other revenue.

Components of Operating Expenses

Compensation and Benefits

Compensation and benefits represent our largest expense category and tend to be driven by our staffing requirements, financial performance, and the general dynamics of the employment market. Stock-based compensation is a non-cash expense related to equity awards. Stock-based compensation can vary depending on the quantity and fair value of the award on the date of grant and the related service period.

Depreciation and Amortization

Depreciation and amortization expense results from the depreciation of long-lived assets purchased, the amortization of purchased and internally developed software, and the amortization of intangible assets.

Technology Support Services

Technology support services consists primarily of costs related to the maintenance of computer equipment supporting our system architecture, circuits supporting our wide area network, support for production software, operating system license and support fees, fees paid to information vendors for displaying data and off-site system hosting fees.

Professional Fees and Outside Services

Professional fees and outside services consist primarily of consulting services, which include supplemental staff activities primarily related to systems development and maintenance, legal, regulatory and audit, and tax advisory services.

Travel and Promotional Expenses

Travel and promotional expenses primarily consist of advertising, costs for special events, sponsorship of industry conferences, options education seminars and travel-related expenses.

Facilities Costs

Facilities costs primarily consist of expenses related to owned and leased properties including rent, maintenance, utilities, real estate taxes and telecommunications costs.

Acquisition-Related Costs

Acquisition-related costs relate to acquisitions and other strategic opportunities. The acquisition-related costs include fees for investment banking advisors, lawyers, accountants, tax advisors, public relations firms, severance and retention costs, capitalized software and facilities, and other external costs directly related to the mergers and acquisitions.

Goodwill Impairment

Goodwill impairment consists of charges to impair goodwill of our reporting units if the carrying value exceeds the implied fair value.

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Other Expenses

Other expenses represent costs necessary to support our operations that are not already included in the above categories, including, but not limited to the impairment of digital assets held presented in intangible assets, net as part of the ordinary operations of the Digital segment and changes in contingent consideration.

Non-Operating (Expenses) Income

Income and expenses incurred through activities outside of our core operations are considered non-operating and are classified as other (expense) income. These activities primarily include interest earned on the investing of excess cash, interest expense related to outstanding debt facilities, dividend income, income and unrealized gains and losses related to investments held in a trust for the Company’s non-qualified retirement and benefit plans, realized gains and losses related to the Company’s previously held minority investments, equity earnings or losses from our investments in other business ventures, impairment of the Company’s investments, investment establishment costs associated with new business ventures, and loan forgiveness provided under the SBA’s Paycheck Protection Program (“PPP”). See Note 12 (“Debt”) for additional information regarding the PPP.

RESULTS OF OPERATIONS

The following are summaries of changes in financial performance and include certain non-GAAP financial measures. Management uses these non-GAAP measures internally in conjunction with GAAP measures to help evaluate our performance and to help make financial and operational decisions. These non-GAAP financial measures assist management in comparing our performance on a consistent basis for purposes of business decision making by removing the impact of certain items management believes do not reflect our underlying operations.

We believe our presentation of these measures provides investors with greater transparency into financial measures used by management and is useful to investors for period-to-period comparisons of our ongoing operating performance.

These non-GAAP financial measures are not presented in accordance with, or as an alternative to, GAAP financial measures and may be calculated differently from non-GAAP measures used by other companies, which reduces their usefulness as comparative measures. We encourage analysts, investors and other interested parties to use these non-GAAP measures as supplemental information to the GAAP financial measures included herein, including our consolidated financial statements, to enhance their analysis and understanding of our performance and in making comparisons. Please see the footnotes below for definitions, additional information, and reconciliations from the closest GAAP measure.

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Comparison of Years Ended December 31, 2022 and 2021

Overview

The following summarizes changes in financial performance for the year ended December 31, 2022, compared to the year ended December 31, 2022:

Year Ended

December 31, Increase/ Percent

Basic earnings per share $ 2.20 $ 4.93 $ (2.73) (55) %

Diluted earnings per share 2.19 4.92 (2.73) (55) %

Adjusted EBITDA margin (4) 65.2 % 66.9 % (1.7) % *

Adjusted earnings margin (5) 42.5 % 44.0 % (1.5) % *

Adjusted Diluted earnings per share (6) $ 6.93 $ 6.05 $ 0.88 15 %

* Not meaningful

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Year Ended

December 31,

Revenues less cost of revenues $ 1,741.7 $ 1,476.1

Recent acquisitions:

Acquisition revenues less cost of revenues $ (28.7) $ —

(3) EBITDA margin represents EBITDA divided by revenues less cost of revenues.

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The following is a reconciliation of net income (loss) allocated to common stockholders to EBITDA and adjusted EBITDA (in millions):

Year Ended December 31,

Interest expense (income), net — (0.4) 8.0 — (0.4) — 49.2 56.4

Acquisition-related costs — 3.9 3.6 — — 9.5 2.9 19.9

Impairment of investment — — — — — — 10.6 10.6

Loan forgiveness — — — — — (1.3) — (1.3)

Gain on investment — — — — — — (7.5) (7.5)

Goodwill impairment — — — — — 460.9 — 460.9

Year Ended December 31,

Interest expense, net — — 12.4 — — — 35.0 47.4

Acquisition-related costs 0.3 2.8 1.4 — — — 11.1 15.6

Impairment of investment — — — — — — 5.0 5.0

The following is a reconciliation of net income allocated to common stockholders to adjusted earnings (in millions):

Year Ended December 31,

Net income allocated to common stockholders $ 234.1 $ 527.3

Acquisition-related costs 19.9 15.6

Impairment of investment 10.6 5.0

Loan forgiveness (1.3) —

Gain on investment (7.5) —

Goodwill impairment 460.9 —

Investment establishment costs 3.0 —

Change in contingent consideration (5.2) (2.7)

Increase (release) of tax reserves 48.5 (5.4)

Tax effect of adjustments (143.7) (31.8)

Deferred tax re-measurements (2.0) 14.6

Net income allocated to participating securities (1.8) (0.4)

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The following summarizes changes in certain operational and financial metrics for the year ended December 31, 2022 compared to the year ended December 31, 2021:

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The following table includes operational and financial metrics for our Options, North American Equities, Europe and Asia Pacific, Futures, and Global FX segments. The metrics listed for Canadian Equities in the table below include NEO as a result of the acquisition completed during 2022. Therefore, the metrics shown in the table below in Canadian Equities do not include NEO for the periods preceding the acquisition. The following summarizes changes in certain operational and financial metrics for the year ended December 31, 2022 compared to the year ended December 31, 2021:

Year Ended

December 31, Increase/ Percent

(in millions, except percentages, trading days, and as noted below)

Options:

Average daily volume (ADV) (in millions of contracts):

Total touched contracts (1) 13.6 12.1 1.5 13 %

Multi-listed contract ADV 10.8 10.1 0.7 7 %

Index contract ADV 2.8 2.0 0.8 44 %

Number of trading days 251 252 (1) (0) %

Total Options revenue per contract (RPC) (2) $ 0.234 $ 0.192 $ 0.042 22 %

Total Options market share 33.2 % 30.8 % 2.4 % *

Multi-listed options market share 28.2 % 27.1 % 1.1 % *

North American Equities:

U.S. Equities:

U.S. Equities - Exchange:

ADV:

Total touched shares (in billions) (1) 1.7 1.7 — (1) %

Market ADV (in billions) 11.9 11.4 0.5 4 %

Market share 13.6 % 14.2 % (0.6) % *

U.S. ETPs: launches (number of launches) 80 117 (37) (32) %

U.S. ETPs: listings (number of listings) 592 539 53 10 %

U.S. Equities - Off-Exchange:

ADV:

Total touched shares (in millions) (1) 90.4 83.0 7.4 9 %

Trading days 251 252 (1) (0) %

Canadian Equities:

ADV (matched shares, in millions) (5) 91.8 49.4 42.4 86 %

Trading days 250 251 (1) (0) %

Europe and Asia Pacific:

European Equities:

ADNV:

Matched ADNV (in billions) (7) € 10.8 € 7.7 € 3.1 41 %

Market ADNV (in billions) 46.2 42.6 3.6 8 %

Market share 23.5 % 18.1 % 5.4 % *

Cboe Clear Europe:

European equities market share cleared (11) 32.7 % 29.6 % 3.1 *

Net settlement volume (12) 10.3 9.9 0.4 4 %

Australian Equities:

ADNV (AUD billions) $ 0.8 $ 0.8 $ — 2 %

Market share - Continuous 16.6 % 15.9 % 0.7 % *

Japanese Equities:

Market share - Lit Continuous 3.6 % 2.7 % 0.9 % *

Futures:

Trading days 251 252 (1) (0) %

Global FX:

ADNV (in billions) $ 40.9 $ 33.9 $ 7.0 21 %

Market share 17.6 % 16.6 % 1.0 *

Trading days 260 260 — — %

Average Euro/U.S. dollar exchange rate $ 1.054 $ 1.183 $ (0.129) (11) %

Average Euro/British pound exchange rate £ 0.852 £ 0.860 £ (0.008) (1) %

* Not meaningful

Note, the percent change listed represents the change in the unrounded metrics figures.

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(1) Touched volume represents the total number of shares of equity securities and ETFs internally matched on our exchanges or routed to and executed on an external market center.

(2) Average revenue per contract, for options and futures represents total net transaction fees recognized for the period divided by total contracts traded during the period.

(3) Net capture per one hundred touched shares refers to transaction fees less liquidity payments and routing and clearing costs divided by the product of one-hundredth ADV of touched shares on BZX, BYX, EDGX, and EDGA and the number of trading days.

(4) Net capture per 100 touched shares refers to transaction fees less order and execution management system (OMS/EMS) fees and clearing costs divided by the product of one-hundredth ADV of touched shares on BIDS Trading and the number of trading days for the period.

(5) Matched volume represents the total number of shares of equity securities and ETFs activity executed on our exchanges.

(6) Net capture per 10,000 touched shares refers to transaction fees divided by the product of one-ten thousandth ADV of shares for NEO and MATCHNow and the number of trading days.

(7) Matched ADNV represents the average daily notional value of shares or contracts executed on our exchanges.

(8) Net capture per matched notional value refers to transaction fees less liquidity payments in British pounds divided by the product of ADNV in British pounds of shares matched on Cboe Europe Equities and the number of trading days.

(9) Trades cleared refers to the total number of non-interoperable trades cleared.

(10) Fee per trade cleared refers to clearing fees divided by number of non-interoperable trades cleared.

(11) European Equities market share cleared represents Cboe Clear Europe’s client volume cleared divided by the total volume of the publicly reported European venues.

(12) Net settlement volume refers to the total number of settlements executed after netting.

(13) Net fee per settlement refers to settlement fees less direct costs incurred to settle divided by the number of settlements executed after netting.

(14) Net capture per matched notional value refers to transaction fees less liquidity payments in Australian dollars divided by the product of ADNV in Australian dollars of shares matched on Cboe Australia and the number of Australian Equities trading days.

(15) Net capture per matched notional value refers to transaction fees less liquidity payments in Japanese Yen divided by the product of ADNV in Japanese Yen of shares matched on Cboe Japan and the number of Japanese Equities trading days.

(16) Net capture per one million dollars traded refers to net transaction fees less liquidity payments, if any, divided by the Spot and SEF products of one-thousandth of ADNV traded on the Cboe FX Markets and the number of trading days, divided by two, which represents the buyer and seller that are both charged on the transaction.

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Revenue

Total revenues for the year ended December 31, 2022 increased $463.7 million, or 13%, compared to the prior period primarily due to higher revenue across all revenue captions as a result of increased volumes traded on the Options and European Equities exchanges, an increase in the Section 31 fee rate following a rate increase that was effective on May 14, 2022, an increase in data and access solutions revenue primarily related to an increase in access and capacity fees in the Options and North American Equities segments, and additional revenues attributable to acquisitions made in 2022 and the later half of 2021. The following summarizes changes in revenues for the year ended December 31, 2022 compared to the year ended December 31, 2021 (in millions, except percentages):

Year Ended

December 31, Increase/ Percent

Cash and Spot Markets

Cash and spot markets revenue increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to increases in regulatory fees and transaction and clearing fees, partially offset by a decrease in industry market data fees. Regulatory fees increased primarily due to an 109% increase in the Section 31 fee rate, from an average rate of $7.80 per million dollars of covered sales for the year ended December 31, 2021 to an average rate of $16.30 per million dollars of covered sales for the year ended December 31, 2022. Transaction and clearing fees increased primarily due to a 41% increase in European Equities matched ADNV, additional transaction and clearing fees attributable to NEO, which was acquired in second quarter of 2022, and a 21% increase in Global FX ADNV, partially offset by a 1% decrease in total touched shares on the U.S. Equities exchanges, a 17% decrease in the fee per trade cleared by Cboe Clear Europe, and adverse changes in foreign currency rates, most notably Euro and British Pounds, for the year ended December 31, 2022 compared to the prior period. Industry market data fees decreased primarily due to a decrease in U.S. tape plan revenue as a result of a 1% decline in market share on the U.S. Equities exchanges.

Data and Access Solutions

Data and access solutions revenue increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to increases in access and capacity fees and proprietary market data fees. Access and capacity fees increased primarily due to increased logical and physical port fees in the Options and North American Equities segments driven by an increase in subscribers, coupled with an increase in access and membership fees across the Europe and Asia Pacific and Options segments driven by an increase in subscribers. Proprietary market data fees increased primarily due to proprietary market data attributable to Cboe Asia Pacific, which was acquired in the third quarter of 2021, and NEO.

Derivatives Markets

Derivatives markets revenue increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to increases in transaction and clearing fees and regulatory fees. Transaction and clearing fees increased primarily due to a 44% increase in index options ADV and a 7% increase in multi-listed options ADV, partially offset by a 5% decrease in Futures ADV. Regulatory fees increased primarily due to a 109% increase in the Section 31 fee rate, from an average rate of $7.80 per million dollars of covered sales for the year ended December 31, 2021 to an average rate of $16.30 per million dollars of covered sales for the year ended December 31, 2022.

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Cost of Revenues

The following tables reconcile the cost of revenues captions presented on the consolidated statements of income to the updated net revenue captions discussed in Note 1 (“Nature of Operations”) for the year ended December 31, 2022 and 2021, respectively (in millions):

Year Ended December 31,

Cash andSpot Markets Data andAccess Solutions DerivativesMarkets Total

Routing and clearing fees 56.0 — 27.2 83.2

Royalty fees and other cost of revenues 14.1 9.2 110.3 133.6

Year Ended December 31,

Cash andSpot Markets Data andAccess Solutions DerivativesMarkets Total

Routing and clearing fees 65.2 — 22.6 87.8

Royalty fees and other cost of revenues 14.3 8.4 77.9 100.6

Cost of revenues increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to increased cash and spot markets and derivatives markets costs of revenues driven by an increase in Section 31 fees as a result of an increase in the Section 31 fee rate, coupled with an increase in royalty fees and an increase in liquidity payments driven by an increase in volumes traded on the Options and European Equities exchanges.

The following summarizes changes in the disaggregated cost of revenues for the year ended December 31, 2022 compared to the year ended December 31, 2021 (in millions, except percentages):

Year Ended

December 31, Increase/ Percent

Routing and clearing 83.2 87.8 (4.6) (5) %

Royalty fees and other cost of revenues 133.6 100.6 33.0 33 %

Liquidity Payments

Liquidity payments increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to an increase in volumes traded on the Options and European Equities exchanges, partially offset by a decrease in volumes traded on the U.S Equities exchanges.

Routing and Clearing

Routing and clearing fees decreased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to a decrease in routed shares on the U.S. Equities exchanges and adverse changes in foreign currency rates, most notably Euro and British Pounds, for the year ended December 31, 2022 compared to the prior period, partially offset by an increase in routed trades on the Options exchanges.

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Section 31 Fees

Section 31 fees increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to a 109% increase in the Section 31 fee rate, from an average rate of $7.80 per million dollars of covered sales in 2021 to an average rate of $16.30 per million dollars of covered sales in 2022.

Royalty Fees and Other Cost of Revenues

Royalty fees increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to an increase in trading volumes of licensed products in the Options segment.

Revenues Less Cost of Revenues

Revenues less cost of revenues increased $265.6 million, or 18%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to an increase in derivatives markets revenue less cost of revenues attributable to an increase in volumes traded on the Options exchanges, an increase in access and capacity fees in the Options and North American Equities segments, and additional revenues less cost of revenues attributable to acquisitions made in 2022 and the latter half of 2021.

The following summarizes the components of revenues less cost of revenues for the year ended December 31, 2022, presented as a percentage of revenues less cost of revenues and compared to the year ended December 31, 2021 (in millions, except percentages):

Percentage of

Revenues Less

Cost of

Revenues

Year Ended Year Ended

December 31, Percent December 31,

Cash and Spot Markets

Cash and spot markets revenues less cost of revenues increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to increases in transaction and clearing fees less liquidity payments and routing and clearing costs (“net transaction and clearing fees”) in the Global FX and Europe and Asia Pacific segments, partially offset by a decrease in industry market data fees. Net transaction and clearing fees increased primarily due to a 21% increase in Global FX ADNV, 41% increase in European Equities matched ADNV, and net transaction and clearing fees attributable to Cboe Asia Pacific and NEO, partially offset by a 1% decrease in total touched shares on the U.S. Equities exchanges and adverse changes in foreign currency rates, most notably Euro and British Pounds, for the year ended December 31, 2022 compared to the prior period. Industry market data fees decreased primarily due to a decrease in U.S. tape plan revenue driven by a 1% decline in market share on the U.S. Equities exchanges.

Data and Access Solutions

Data and access solutions revenues less cost of revenues increased for the year ended December 31, 2022 compared the year ended December 31, 2021, primarily due to increases in access and capacity fees and proprietary market data fees. Access and capacity fees increased primarily due to increased logical and physical port fees in the Options and North American Equities segments driven by an increase in subscribers, coupled with an increase in access and membership fees across the Europe and Asia Pacific and Options segments, also driven by an increase in subscribers. Proprietary market data fees increased primarily due to proprietary market data attributable to Cboe Asia Pacific and NEO.

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Derivatives Markets

Derivatives markets revenues less cost of revenues increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to increases in transaction and clearing fees primarily due to a 44% increase in index options ADV, partially offset by a 5% decrease in Futures ADV and an increase in royalty fees due to an increase in trading volumes of licensed products in the Options segment.

Operating Expenses

For the year ended December 31, 2022 compared to the year ended December 31, 2021, total operating expenses increased primarily due to goodwill impairment recorded in 2022 and an increase in compensation and benefits compared to the prior period. The following summarizes changes in operating expenses for the year ended December 31, 2022 compared to the year ended December 31, 2021 (in millions, except percentages):

Year Ended

December 31, Increase/ Percent

Depreciation and amortization 166.8 167.4 (0.6) (0) %

Professional fees and outside services 89.0 83.7 5.3 6 %

Travel and promotional expenses 23.7 9.7 14.0 144 %

Acquisition-related costs 19.9 15.6 4.3 28 %

Goodwill impairment 460.9 — 460.9 * %

* Not meaningful

Compensation and Benefits

Compensation and benefits increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to a $66.1 million increase in salaries, wages, and bonuses, driven by a $24.3 million increase in salaries and wages as a result of merit, cost-of-labor increases, and increased headcount excluding acquisitions, as well as a $23.0 million increase in bonuses from strong Company performance year to date, resulting in higher short-term incentive bonus expense, coupled with an $18.8 million increase related to the acquisitions of Cboe Digital, Cboe Asia Pacific, and NEO.

Depreciation and Amortization

Depreciation and amortization was relatively flat for the year ended December 31, 2022 compared to the year ended December 31, 2021, due to an increase in depreciation expense related to the acquisitions of Cboe Asia Pacific, Cboe Digital, and NEO, as well as an increase in depreciation expense related to the former headquarters location, which was not subject to depreciation during four months in 2021, as it was classified as held for sale from May 1, 2019 until May 1, 2021, offset by a decline in amortization under the discounted cash flow method for the intangibles acquired in the Bats acquisition.

Technology Support Services

Technology support services costs increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to increases in technology support services, including software maintenance support service fees, software licenses and subscriptions, cloud services, and hardware maintenance, partially offset by a decrease in purchased hardware and equipment and purchased software.

Professional Fees and Outside Services

Professional and outside services fees increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to increases in regulatory costs driven by an increase in CAT expense, as well as

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increases in consulting fees, recruiting fees, contract services, and external audit fees, partially offset by a decrease in legal fees.

Travel and Promotional Expenses

Travel and promotional expenses increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to an increase in marketing expenses driven by product promotions and an increase in travel expenses due to changes in travel guidelines following the COVID-19 pandemic.

Facilities Costs

Facilities costs increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to an increase in rent expense related to the new Amsterdam lease that commenced in February 2022 and additional office space in London that commenced in March 2022, along with additional office locations following acquisitions in 2021 and 2022.

Acquisition-Related Costs

Acquisition-related costs increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due an increase in general and administrative costs associated with the acquisitions of Cboe Digital and NEO.

Goodwill Impairment

Goodwill impairment increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, due to impairment recognized in the Digital segment in the second quarter of 2022.

Other Expenses

Other expenses increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to increased charitable contributions, an increase in VAT taxes, and expenses associated with hosting the Cboe Risk Management Conference.

Operating Income

As a result of the items above, operating income for the year ended December 31, 2022 was $489.6 million, compared to operating income of $805.9 million for the year ended December 31, 2021, a decrease of $316.3 million.

Interest Expense, Net

Net interest expense increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to additional interest expense incurred in connection with the 3.000% Senior Notes issued at the end of the first quarter of 2022, coupled with additional interest expense incurred in connection with the additional borrowings on the Term Loan in the second quarter of 2022, as well as an increase in the SOFR rate, partially offset by principal repayments on the Term Loan and a decrease in interest expense related to the Cboe Clear Europe Credit Facility, which was amended and restated in June 2022.

Other (Expense) Income, Net

Net other expense decreased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to a $7.5 million gain on the Company’s previous minority ownership of ErisX, which increased in fair value as a result of the Company’s acquisition of Cboe Digital, recorded in the second quarter of 2022, coupled with a $5.0 million impairment adjustment recorded in 2021 related to the Company’s previously held investment in Curve Global, which did not recur in 2022, and a $4.2 million unrealized gain on the Company’s investment in 7Ridge Fund (which owns Trading Technologies) as part of a semi-annual valuation update recorded in 2022, partially offset by a $10.6 million impairment adjustment on the Company’s investment in American Financial Exchange, LLC recorded in 2022.

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Income Before Income Tax Provision

As a result of the above, income before income tax provision for the year ended December 31, 2022 was $432.9million compared to income before income tax provision of $756.1 million for the year ended December 31, 2021, a decrease of $323.2million.

Income Tax Provision

For the year ended December 31, 2022, the income tax provision was $197.9 million compared to $227.1 million for the year ended December 31, 2021, a decrease of $29.2 million, primarily due to a decrease in income before income tax provision, partially offset by a higher effective tax rate for the year ended December 31, 2022. The effective tax rate for the year ended December 31, 2022 was 45.7%, compared to a rate of 30.0% for the year ended December 31, 2021. The higher effective tax rate in the year ended December 31, 2022 compared to the year ended December 31, 2021, is primarily due to the derecognition of the Company’s Section 199 tax benefits for the tax years 2008 through 2016 upon the unfavorable decision by the United States Tax Court in the matter of Bats Global Markets Holdings, Inc. and Subsidiaries v. Commissioner of Internal Revenue, on March 31, 2022.

The following table summarizes the non-GAAP calculation of the effective tax rate for the year ended December 31, 2022:

Year Ended

GAAP effective tax rate 45.7 %

Tax effect of goodwill impairment (8.5) %

Tax effect of Section 199 related matters (5.5) %

Net Income

As a result of the items above, net income for the year ended December 31, 2022 was $235.0 million, or 14% of revenues less cost of revenues, compared to $529.0million, or 36% of revenues less cost of revenues, for the year ended December 31, 2021, a decrease of $294.0 million, or 56%.

Segment Operating Results

We report results from our six segments: Options, North American Equities, Europe and Asia Pacific, Futures, Global FX, and Digital. Segment performance is primarily based on operating income (loss). We have aggregated all corporate costs, as well as other business ventures, within Corporate Items and Eliminations as those activities should not be used to evaluate a segment’s operating performance. All operating expenses that relate to activities of a specific segment have been allocated to that segment.

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The following summarizes our total revenues by segment (in millions, except percentages):

Percentage of

Total

Revenues

Year Ended Year Ended

December 31, Percent December 31,

Digital 0.3 — * — % — %

Corporate — 0.3 (100) % — % — %

* Not meaningful

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The following summarizes our revenues less cost of revenues by segment (in millions, except percentages):

Percentage of

Total Revenues

less Cost of Revenues

Year Ended Year Ended

December 31, Percent December 31,

Digital (0.4) — * — % — %

Corporate — 0.3 (100) % — % — %

* Not meaningful

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Options

The following summarizes revenues less cost of revenues, operating expenses, operating income, EBITDA and EBITDA margin for our Options segment (in millions, except percentages):

Percentage

of Total

Revenues

Year Ended Year Ended

December 31, Percent December 31,

Revenues less cost of revenues $ 983.2 $ 755.0 30 % 54 % 50 %

EBITDA margin (2) 77.8 % 74.9 % * * *

* Not meaningful

(2) EBITDA margin represents EBITDA divided by revenues less cost of revenues.

Revenues less cost of revenues increased $228.2 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to a 44% increase in index options ADV, coupled with an 6% increase in index options net capture and an increase in logical port fees, partially offset by an increase in royalty fees driven by an increase in trading volumes of licensed products. For the year ended December 31, 2022, operating income for the Options segment increased $202.5 million compared to the year ended December 31, 2021 primarily due to an increase in revenues less cost of revenues, partially offset by an increase in operating expenses. Operating expenses increased $25.7 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to increases in compensation and benefits and travel and promotional expenses, partially offset by a decrease in depreciation and amortization.

North American Equities

The following summarizes revenues less cost of revenues, operating expenses, operating income, EBITDA and EBITDA margin for our North American Equities segment (in millions, except percentages):

Percentage

of Total

Revenues

Year Ended Year Ended

December 31, Percent December 31,

Revenues less cost of revenues $ 378.9 $ 362.5 5 % 23 % 23 %

EBITDA margin (2) 58.1 % 63.8 % * * *

* Not meaningful

(2) EBITDA margin represents EBITDA divided by revenues less cost of revenues.

Revenues less cost of revenues increased $16.4 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to additional revenue attributable to NEO, coupled with an increase in access and capacity fees driven by an increase in physical and logical port fees and a 7% increase in U.S. Equities net capture, partially offset by a 1% decrease in total touched shares on U.S. Equities exchanges and a decrease in industry market data fees as a result of a decrease in U.S. tape plan revenue due to a 1% decline in market share on the U.S. Equities exchanges. For the year ended December 31, 2022, operating income for the North American Equities segment

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decreased $9.5 million compared to the year ended December 31, 2021 primarily due to an increase in operating expenses, partially offset by an increase in revenues less cost of revenues. Operating expenses increased $25.9 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to increases in compensation and benefits, travel and promotional expenses, professional fees and outside services, and technology support services, partially offset by a decrease in depreciation and amortization.

Europe and Asia Pacific

The following summarizes revenues less cost of revenues, operating expenses, operating income, EBITDA and EBITDA margin for our Europe and Asia Pacific segment (in millions, except percentages):

Percentage

of Total

Revenues

Year Ended Year Ended

December 31, Percent December 31,

Revenues less cost of revenues $ 196.1 $ 183.9 7 % 74 % 77 %

EBITDA margin (2) 38.0 % 50.4 % * * *

* Not meaningful

(2) EBITDA margin represents EBITDA divided by revenues less cost of revenues.

Revenues less cost of revenues increased $12.2 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to additional revenue attributed to Cboe Asia Pacific, coupled with an increase in transaction and clearing fees as a result of a 41% increase in European Equities matched ADNV, driven by a 5% increase in European Equities market share, partially offset by a 17% decrease in the fee per trade cleared by Cboe Clear Europe. For the year ended December 31, 2022, operating income for the Europe and Asia Pacific segment decreased $17.9 million compared to the year ended December 31, 2021 primarily due to an increase in operating expenses, partially offset by an increase revenues less cost of revenues. Operating expenses increased $30.1 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to increases in compensation and benefits, other expenses, technology support services, facilities costs, depreciation and amortization, and travel and promotional expenses. Operating income was adversely impacted for the year ended December 31, 2022 compared to the prior period by changes in foreign currency rates, most notably Euros and British Pounds.

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Futures

The following summarizes revenues less cost of revenues, operating expenses, operating income, EBITDA, and EBITDA margin for our Futures segment (in millions, except percentages):

Percentage

of Total

Revenues

Year Ended Year Ended

December 31, Percent December 31,

Revenues less cost of revenues $ 116.0 $ 116.8 (1) % 97 % 97 %

EBITDA margin (2) 49.8 % 58.8 % * * *

* Not meaningful

(2) EBITDA margin represents EBITDA divided by revenues less cost of revenues.

Revenues less cost of revenues decreased $0.8 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due a decline in transaction and clearing fees as a result of a 5% decrease in ADV, coupled with a decrease in membership fees and logical port fees, partially offset by an increase in physical port fees, an increase in proprietary market data revenue, and a 2% increase in net capture. For the year ended December 31, 2022, operating income for the Futures segment decreased $10.8 million compared to the year ended December 31, 2021 primarily due to an increase in operating expenses. Operating expenses increased $10.0 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to increases in compensation and benefits, travel and promotional expenses, and other expenses, partially offset by a decrease in professional fees and outside services.

Global FX

The following summarizes revenues less cost of revenues, operating expenses, operating income, EBITDA and EBITDA margin for our Global FX segment (in millions, except percentages):

Percentage

of Total

Revenues

Year Ended Year Ended

December 31, Percent December 31,

Revenues less cost of revenues $ 67.9 $ 57.6 18 % 99 % 99 %

Operating income $ 8.8 $ 2.7 226 % 13 % 5 %

EBITDA margin (2) 45.2 % 46.7 % * * *

* Not meaningful

(2) EBITDA margin represents EBITDA divided by revenues less cost of revenues.

Revenues less cost of revenues increased $10.3 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to a 21% increase in ADNV, partially offset by a 1% decrease in net capture. For the year ended December 31, 2022, operating income for the Global FX segment increased $6.1 million compared to the year ended December 31, 2021 primarily due to an increase in revenues less cost of revenues, partially offset by an increase in operating expenses. Operating expenses increased $4.2 million for the year ended December 31, 2022

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compared to the year ended December 31, 2021 primarily due to increases in compensation and benefits, facilities costs, technology support services, and professional fees and outside services, partially offset by a decrease in depreciation and amortization.

Digital

The following summarizes revenues less cost of revenues, operating expenses, operating loss, EBITDA, and EBITDA margin for our Digital segment (in millions, except percentages):

Percentage

of Total

Revenues

Year Ended Year Ended

December 31, December 31,

Revenues less cost of revenues $ (0.4) * %

Operating expenses 491.0 * %

Operating income (loss) $ (491.4) * %

EBITDA (1) $ (484.0) * %

EBITDA margin (2) * % *

* Not meaningful

(2) EBITDA margin represents EBITDA divided by revenues less cost of revenues.

The Digital segment was established in the second quarter of 2022 following the acquisition of ErisX, which was subsequently rebranded to Cboe Digital. Cost of revenues exceeded revenues for the year ended December 31, 2022 primarily due to liquidity payments on spot and futures transactions, partially offset by transaction and clearing fees attributable to spot transactions. For the year ended December 31, 2022, the Digital segment had an operating loss of $491.4 million, primarily due to $460.9 million impairment of goodwill.

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LIQUIDITY AND CAPITAL RESOURCES

Below are charts that reflect elements of our capital allocation:

We expect our cash on hand at December 31, 2022 and other available resources, including cash generated from operations, to be sufficient to continue to meet our cash requirements for the foreseeable future. In the near term, we expect that our cash from operations and availability under the Revolving Credit Facility, and potentially participating in future financing transactions to obtain additional capital will meet our cash needs to fund our operations, capital expenditures, interest payments on debt, debt repayments, such as under the Term Loan Agreement, which matures on December 15, 2023, any dividends, potential strategic acquisitions, opportunities for common stock repurchases under the previously announced program, and payouts related to the unfavorable decision in the Section 199 litigation. See Note 12 (“Debt”) to the consolidated financial statements for further information.

Cboe Clear Europe also has a €1.25 billion committed syndicated multicurrency revolving and swingline credit facility agreement with Cboe Clear Europe as borrower and the Company as guarantor of scheduled interest and fees on borrowings (but not the principal amount of any borrowings) (the “Facility”). The Facility is available to be drawn by Cboe Clear Europe towards (a) financing unsettled amounts in connection with the settlement of transactions in securities and other items processed through Cboe Clear Europe’s clearing system and (b) financing any other liability or liquidity requirement of Cboe Clear Europe incurred in the operation of its clearing system. Borrowings under the Facility are secured by cash, eligible bonds and eligible equity assets deposited by Cboe Clear Europe into secured accounts. As a result, should the Facility be drawn by Cboe Clear Europe it could potentially impact Cboe Clear Europe’s liquidity, and we can give no assurance that this Facility will be sufficient to meet all of such obligations or sufficiently mitigate Cboe Clear Europe’s liquidity risk to meet its payment obligations when due. Additionally, a default of the Facility may allow lenders, under certain circumstances, to accelerate any related drawn amounts and may result in the acceleration of the Company’s other outstanding debt to which a cross-acceleration or cross-default provision applies, which may limit the Company’s liquidity, business and financing activities. The Facility was amended on June 30, 2022, which extended the term of the facility through June 29, 2023. Please refer to Note 12 (“Debt”) for further information on the amendment.

Our long-term cash needs will depend on many factors, including an introduction of new products, enhancements of current products, the geographic mix of our business and any potential acquisitions. We believe our cash from operations and the availability under our Revolving Credit Facility will meet any long-term needs unless a significant acquisition or acquisitions are identified, in which case we expect that we would be able to borrow the necessary funds and/or issue additional shares of our common stock to complete such acquisition(s).

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Cash and cash equivalents includes cash in banks and all non-restricted, highly liquid investments with original maturities of three months or less at the time of purchase. Cash and cash equivalents as of December 31, 2022 increased $90.8 million from December 31, 2021 primarily due to additional borrowings on the Term Loan Agreement, issuance of the 3.000% Senior Notes in the first quarter of 2022, and results of operations, partially offset by acquisitions, net of cash acquired and repayments on the Term Loan Agreement. See “Cash Flow” below for further discussion.

Our cash and cash equivalents held outside of the United States in various foreign subsidiaries totaled $226.1 million and $185.9 million as of December 31, 2022 and 2021, respectively. The remaining balance was held in the United States and totaled $206.6 million and $156.0 million as of December 31, 2022 and 2021, respectively. The majority of cash held outside the United States is available for repatriation, but under current law, could subject us to additional United States income taxes, less applicable foreign tax credits. See Note 18 (“Regulatory Capital”) for information regarding cash held for purposes of regulatory capital requirements.

Our financial investments include deferred compensation plan assets as well as investments with original or acquired maturities longer than three months but that mature in less than one year from the balance sheet date and are recorded at fair value. As of December 31, 2022, financial investments primarily consisted of U.S. Treasury securities and deferred compensation plan assets.

Cash Flow

The following table summarizes our cash flow data for the years ended December 31, 2022, 2021 and 2020 (in millions):

For the Year Ended

December 31,

Net cash provided by operating activities $ 651.1 $ 596.8 $ 1,458.8

Net cash used in investing activities (835.1) (352.7) (430.5)

Net cash provided by (used in) financing activities 81.7 (200.3) (201.7)

As of December 31,

Net Cash Flows Provided by Operating Activities

During the year ended December 31, 2022, net cash provided by operating activities was $416.1 million higher than net income. The variance is primarily attributable to the adjustment for goodwill impairment of $460.9 million, the adjustment for depreciation and amortization expense of $166.8 million, and the change in Section 31 fees payable of $106.3 million, partially offset by the change in restricted cash and cash equivalents of $217.5 million, driven by the change in margin and clearing funds related to Cboe Clear Europe for the year ended December 31, 2022, and the benefit for deferred income taxes of $155.7 million.

Net cash flows provided by operating activities were $651.1 million and $596.8 million for the years ended December 31, 2022 and 2021, respectively. The change in net cash flows provided by operating activities was primarily due to the adjustment for goodwill impairment and the change in Section 31 fees payable, partially offset by the change in net income, the change in restricted cash and cash equivalents, driven by margin deposits and clearing funds related to Cboe Clear Europe, the change in benefit for deferred income taxes, and the change in accounts receivable.

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Net cash provided by operating activities was $67.8 million higher than net income for the fiscal year ended December 31, 2021.The variance is primarily attributable to the adjustment for depreciation and amortization expense of $167.4 million, the change in accounts payable and accrued liabilities of $45.0 million, and the change in unrecognized tax benefits of $33.2 million, partially offset by the change in Section 31 fees payable of $112.1 million and the change in restricted cash and cash equivalents, driven by a $66.2 million decrease in margin deposits and clearing funds related to Cboe Clear Europe for the year ended December 31, 2021.

Net cash provided by operating activities was $596.8 million and $1,458.8 million for the years ended December 31, 2021 and 2020, respectively. The change in net cash flows provided by operating activities was primarily due to the change in restricted cash and cash equivalents, driven by margin deposits and clearing funds related to Cboe Clear Europe, as well as the change in Section 31 fees payable, partially offset by the change in accounts receivable, the change in net income, the change in the bargain purchase gain, and the change in provision for deferred income taxes for the year ended December 31, 2021 compared to the year ended December 31, 2020.

Net Cash Flows Used in Investing Activities

During the year ended December 31, 2022, net cash used in investing activities primarily consisted of acquisitions, net of cash acquired of $708.3 million, purchases of available-for-sale financial investments of $104.7 million, and purchases of property and equipment and leasehold improvements of $59.8 million, partially offset by proceeds from maturities of available-for-sale financial investments of $51.2 million.

Net cash flows used in investing activities were $835.1 million and $352.7 million for the years ended December 31, 2022 and 2021, respectively. The variance is primarily due to the change in acquisitions, net of cash acquired, and the change in proceeds from maturities of available-for-sale financial investments, partially offset by the change in contributions to investments for the year ended December 31, 2022 compared to the year ended December 31, 2021.

During the year ended December 31, 2021, net cash used in investing activities primarily consisted of contributions to investments of $209.8 million, acquisitions, net of cash acquired of $151.5 million, and purchases of available-for-sale financial investments of $101.2 million, partially offset by proceeds from maturities of available-for-sale financial investments of $160.2 million.

Capital expenditures are expected to be in the range of $60.0 million to $66.0 million, reflecting expenditures associated with the Company’s ongoing capacity and technology-related investments, as well as continued integration of Cboe Asia Pacific and global expansion of data and access solutions.

Net Cash Flows Provided by (Used in) Financing Activities

During the year ended December 31, 2022, net cash provided by financing activities primarily consisted of proceeds from the long-term debt issuance of $663.6 million, partially offset by principal repayments of long-term debt of $220.0 million, cash dividends on common stock, share repurchases, and payments of contingent consideration related to acquisitions.

Net cash flows provided by (used in) financing activities were $81.7 million and ($200.3) million for the years ended December 31, 2022 and 2021, respectively. The variance is primarily due to proceeds from the long-term debt issuance, partially offset by principal repayments of long-term debt, the change in payments of contingent consideration related to acquisitions, the change in share repurchases, and the change in cash dividends on common stock.

Net cash flows used in financing activities totaled $200.3 million for the year ended December 31, 2021. During the year ended December 31, 2021, net cash used in financing activities primarily consisted of cash dividends paid on common stock of $193.3 million and share repurchases of $81.3 million, partially offset by proceeds from long-term debt of $110.0 million.

For the year ended December 31, 2020, the Company received proceeds from long-term debt of $493.7 million, of which $70.0 million was used to pay down the revolving credit facility draw taken in the third quarter of 2020, repurchased $349.1 million of common stock, paid dividends totaling $170.6 million, and paid down $155.0 million of long-term debt.

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Financial Assets

The following summarizes our financial assets excluding margin deposits and clearing funds as of December 31, 2022, 2021 and 2020 (in millions):

As of December 31,

Less deferred compensation plan assets (27.5) (28.0) (24.5)

Less cash collected for Section 31 fees (93.7) (25.9) (103.0)

Debt

The following summarizes our debt obligations as of December 31, 2022, 2021 and 2020 (in millions):

As of December 31,

3.000% Senior Notes 300.0 — —

Revolving Credit Agreement — — —

Cboe Clear Europe Credit Facility — — —

At December 31, 2022, we were in compliance with the covenants of our debt agreements.

In addition to the debt outstanding, as of December 31, 2022, we had an additional $400.0 million available through our revolving credit facility, with the ability to borrow another $200.0 million by increasing the commitments under the facility. Together with adjusted cash, we had $1.0 billion available to fund our operations, capital expenditures, potential acquisitions, debt repayments and any dividends, net of regulatory capital requirements, as of December 31, 2022.

Dividends

The Company’s expectation is to continue to pay dividends. The decision to pay a dividend, however, remains within the discretion of the Company's Board of Directors and may be affected by various factors, including our earnings, financial condition, capital requirements, level of indebtedness and other considerations our Board of Directors deems relevant. Future debt obligations and statutory provisions, among other things, may limit, or in some cases prohibit, our ability to pay dividends.

Share Repurchase Program

In 2011, the Board of Directors approved an initial authorization for the Company to repurchase shares of its outstanding common stock of $100 million and subsequently approved additional authorizations, for a total authorization of $1.6 billion. The program permits the Company to purchase shares through a variety of methods, including in the open market or through privately negotiated transactions, in accordance with applicable securities laws. It does not obligate the Company to make any repurchases at any specific time or situation. Share repurchases are repurchased to the Company’s Treasury stock and ultimately retired or they are available to be redistributed.

Under the program, for the year ended December 31, 2022, the Company repurchased 876,238 shares of common stock at an average cost per share of $115.20, totaling $100.9 million. Since inception of the program through December

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31, 2022, the Company has repurchased 18,948,367 shares of common stock at an average cost per share of $70.30, totaling $1.3 billion. The Company retired 744,127 and 18,072,129 shares of treasury stock in the years ended December 31, 2022 and 2021, respectively.

On August 16, 2022, President Biden signed into law H.R. 5376 (commonly known as the “Inflation Reduction Act of 2022” or simply the “IRA”). Tax measures contained in the new law include, among other items, an excise tax of 1% on corporate stock buy-backs. The IRA imposes a new 1% excise tax on repurchases of stock by domestic corporations with stock traded on established securities markets. The amount on which the tax is imposed is reduced by the value of any stock issued by such corporation during the tax year and the tax generally applies to stock buy-back transactions occurring after December 31, 2022. This new tax is not expected to result in a material impact to the Company.

As of December 31, 2022, the Company had $217.9 million of availability remaining under its existing share repurchase authorizations.

Lease and Obligations

The Company currently leases additional office space, data centers and remote network operations center, with lease terms remaining from 5 months to 174 months as of December 31, 2022. Additionally, in October 2021, the Company signed a new lease that commenced in February 2022 for a new principal office space in Amsterdam. See Note 24 (“Leases”) to the consolidated financial statements for additional information.

Total rent expense related to current and former lease obligations for the years ended December 31, 2022, 2021 and 2020 totaled $30.0 million, $25.6 million and $20.2 million, respectively. In addition to our lease obligations, we have contractual obligations related to certain operating leases, data and telecommunications agreements, and our long-term debt outstanding.

Purchase obligations include our estimate of the minimum outstanding obligations under agreements to purchase goods or services that we believe are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed or minimum and maximum amounts to be paid; and the approximate timing of the transaction. Purchase obligations include certain licensing agreements with various licensors which contain annual minimum fee requirements as well as payments calculated using agreed upon contract rates and reported cleared volumes. Purchase obligations exclude agreements that are cancellable at any time without penalty.

We have excluded from the contractual obligations listed below $543.0 million in cash margin deposits and clearing funds related to Cboe Clear Europe and Cboe Clear Digital. Clearing participants of Cboe Clear Europe are required to make deposits to a clearing fund. The cash deposits made by clearing participants are recorded in the consolidated balance sheet as current assets with equal and offsetting current liabilities. See Note 14 (“Clearing Operations”) to the consolidated financial statements for additional information on Cboe Clear Europe and Cboe Clear Digital and the margin deposits and clearing funds.

Future minimum payments under these leases and agreements were as follows as of December 31, 2022:

Payments Due by Period

Less than More than

Total 1 year 1 year

Contractual Obligations

Commercial Commitments and Contractual Obligations

As of December 31, 2022, our commercial commitments and contractual obligations included operating leases, data and telecommunications agreements, equipment leases, our long-term debt outstanding, contingent considerations, software development activities and other obligations. See Note 23 (“Commitments, Contingencies, and Guarantees”) to the consolidated financial statements for a discussion of commitments and contingencies, Note 12 (“Debt”) for a

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discussion of the outstanding debt, Note 14 (“Clearing Operations”) for information on Cboe Clear Europe and Cboe Digital’s clearinghouse exposure guarantees, and Note 24 (“Leases”) for discussion on operating leases and equipment leases.

Guarantees

We use Wedbush and Morgan Stanley to clear our routed equities transactions for our U.S. Equities exchanges. Wedbush and Morgan Stanley guarantee the trade until one day after the trade date, after which time the National Securities Clearing Corporation (“NSCC”) provides a guarantee. The BIDS Trading ATS platform delivers matched trades to BofA Securities, Inc. (“BOA”), which delivers the matched trades to the NSCC. BOA guarantees the trade until one day after the trade date, after which time the NSCC provides a guarantee. In the case of failure to perform on the part of Wedbush or Morgan Stanley on routed transactions for our U.S. Equities exchanges, we provide the guarantee to the counterparty to the trader. In the case of failure to perform on the part of BOA on transactions for the BIDS Trading ATS platform, BIDS has obligations to the counterparties to satisfy the trades. OCC acts as a central counterparty on all transactions in listed equity options in our Options segment, and as such, guarantees clearance and settlement of all of our options transactions. We believe that any potential requirement for us to make payments under these guarantees is remote and accordingly, have not recorded any liability in the consolidated financial statements for these guarantees. Similarly, with respect to trades in U.S. listed equity options and futures occurring on Cboe Options, C2, BZX, EDGX, and CFE, we deliver matched trades of our customers to the OCC, which acts as a central counterparty on all transactions occurring on these exchanges and, as such, guarantees clearance and settlement of all of those matched options and futures trades. With respect to Canadian equities, we deliver matched trades of our customers to The Canadian Depository for Securities, which acts as a central counterparty on all transactions occurring on MATCHNow and NEO and, as such, guarantees clearance and settlement of all of our matched Canadian equities trades. With respect to Australian equities and derivatives, we deliver matched trades of our customers to ASX Clear Pty Ltd and ASX Settlement Pty Ltd. ASX Clear Pty Ltd acts as a central counterparty on all transactions occurring on Cboe Australia and, as such, guarantees clearance and settlement on all of our matched trades in Australia. With respect to Japanese equities, we deliver matched trades of our customers to the Japanese Securities Clearing Corporation, which acts as a central counterparty on all transactions occurring on Cboe Japan and, as such, guarantees clearance and settlement on all of our matched trades in Japan.

CRITICAL ACCOUNTING ESTIMATES

The preparation of consolidated financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of the amounts of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to areas that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. The Company bases its estimates on historical experience, observance of trends in particular areas, information available from outside sources and various other assumptions that are believed to be reasonable under the circumstances. Information from these sources form the basis for making judgments about the carrying values of assets and liabilities that may not be readily apparent from other sources.

We have identified the estimates below as critical to our business operations and the understanding of our results of operations. The impact of, and any associated risks related to, these estimates on our business operations is discussed throughout "Management's Discussion and Analysis of Financial Condition and Results of Operations." For a detailed discussion on these estimates and other accounting policies, see Note 2 (“Summary of Significant Accounting Policies”) to the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

Goodwill and Other Intangible Assets

Description

Our acquisitions of Bats, Silexx Financial Systems, LLC (“Silexx”), Livevol, Inc. (“LiveVol”), Hanweck, FT Options, Trade Alert, MATCHNow, BIDS Holdings, Cboe Asia Pacific, Cboe Digital, and NEO resulted in the recording of goodwill and other intangible assets, while our acquisition of Cboe Clear Europe, resulted in a bargain purchase gain and other intangible assets. In accordance with FASB Accounting Standards Codification (“ASC”) 350 – Intangibles – Goodwill and

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Other, we test the carrying values of goodwill and indefinite-lived intangible assets for impairment at least annually, or more frequently when events or changes in circumstances signal indicators of impairment are present.

Judgments and Uncertainties

The estimated fair values of our reporting units are based on the market approach and the income approach (using discounted estimated future cash flows). The estimated fair values of indefinite-lived intangibles are based on the cost method and income approach. The discounted estimated future cash flow analysis requires judgments about the discount rate, forecasted revenue growth rate, and operating expenses, that are inherent in these fair value estimates over the estimated remaining operating period. Additionally, the analysis contains uncertainty surrounding future events. As such, actual results may differ from these estimates and lead to a revaluation of our goodwill and indefinite-lived intangible assets.

Effect if Actual Results Differ from Assumptions

If updated estimates indicate that the fair value of goodwill or any indefinite-lived intangibles is less than the carrying value of the asset, an impairment charge is expected to be recorded in the consolidated statements of income in the period of the change in estimate, which could result in a material change to the consolidated financial statements.

Following the acquisition of Cboe Digital in the quarter ended June 30, 2022, negative events and trends in the broader digital asset environment emerged, such as deleveraging and bankruptcies, and certain negative trends in the broader digital asset environment that started in late 2021 intensified, such as the decline in digital asset prices, overall market activity, and market capitalization. Additionally, following the acquisition of Cboe Digital , the efforts to syndicate minority ownership interests in Cboe Digital to potential investors during the quarter ended June 30, 2022 became more challenging, and the outlook for the Digital segment’s future market growth was negatively impacted. The Company considered these developments, in particular the syndication efforts during the quarter ended June 30, 2022, to be potential indications of impairment and performed an interim impairment test for the goodwill recognized in the Digital reporting unit during the quarter ended June 30, 2022. The Company concluded that the carrying value of the reporting unit exceeded its estimated fair value, which was based on the income approach and corroborated with the market approach, and recorded a goodwill impairment charge of $460.1 million in the consolidated statements of income during the quarter ended June 30, 2022, and also recognized a deferred tax asset of $116.2 million. This deferred tax asset, resulting from the excess of tax-deductible goodwill over book goodwill, relates to future tax deductions the Company expects to realize to reduce potential tax payments on future income. As a result, the carrying value of Cboe Digital decreased by $343.9 million, to $220.0 million as of June 30, 2022. The Company also performed testing over the intangible assets recognized as a result of the Cboe Digital acquisition during the quarter ended June 30, 2022, and based on the results of the assessments, determined there was no impairment required as the fair value approximated the carrying value. No other long lived assets were recognized as a result of the acquisition and subject to further assessment.

As a result of the finalization of the net working capital calculation associated with the acquisition of Cboe Digital during the quarter ended September 30, 2022, the Company recorded additional goodwill of $0.8 million. Subsequently, the Company concluded that the indicators of impairment outlined in the previous paragraph continued to be relevant and recorded an additional goodwill impairment charge of $0.8 million in the consolidated statements of income for the three months ended September 30, 2022, resulting in the write-down of the carrying value of the goodwill associated with the acquisition of Cboe Digital to zero.

As a result of the Company’s annual impairment analysis, completed in the fourth quarter of 2022, in which all reporting units estimated fair value exceeded their carrying value, we do not consider our goodwill and indefinite-lived intangibles to have a significant risk of additional impairment.

Income Taxes

Description

The Company’s consolidated global income tax provision, deferred tax assets and liabilities, valuation allowances, and liabilities for unrecognized tax benefits are determined through the interpretation of tax laws and assumptions of future events to calculate an expectation of future tax consequences.

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Judgments and Uncertainties

On an ongoing basis, the Company evaluates its tax estimates and judgments. This evaluation is based on factors including historical experience, such as the conclusions of examinations by tax authorities, changes in tax laws or rates, new examination activity, and results of any related legal processes. We use judgment in the evaluation of uncertain tax positions and the estimation of unrecognized tax benefits when determining the largest amount greater than 50% likely to be realized upon ultimate settlement with the taxing authority, assessing the likelihood of the benefit being realized upon settlement, and the calculating expected ultimate settlement amount.

Effect if Actual Results Differ from Assumptions

Significant changes in these estimates or judgments may result in an increase or decrease to our tax provision in a future period. Additionally, it is possible that the ultimate settlement may differ from the liabilities for unrecognized tax benefits currently reported if tax authorities ultimately reach a conclusion that differs from the Company’s expectation. We believe assumptions made regarding income taxes to be reasonable and do not believe any change in the judgments made by management would result in a material change to the consolidated financial statements.

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