So resources inside the organization are now more focused on delivering organic growth initiatives that are integrating acquisitions that we’ve been doing in the last couple of years. And then, of course, not only the resources internally but then it frees up capital. Our balance sheet is in very good shape now. We’re kicking off lots of free cash flow so we can do — return capital to our shareholders through dividends and buybacks. So while we’ve had a nice win from 0DTE, we continue to see growth as we built this global footprint. And I think we’ve got a lot of, what I call, land and expand. We’ve got lots of opportunities to sell what we’ve got in different markets around the world. And then we’re doing quite well in the markets that we entered, our market share.
If you look at Japan, Australia, Canada, once they get on our technology, our market share seems to expand. So we’re feeling good about that. So we have lots of things that we’re looking forward to. Do we have another 0DTE up our sleeve? We might like to think we do but I’m not sure we do. But that franchise and the SPX complex, just the way we look at it is it has high demand around the world, not just in the U.S. capital and liquidity continues to flow in the U.S. And a lot of times, people that want to invest and trade in the U.S. are looking to the SPX complex.
Owen Lau: Got it. Thanks a lot.
Operator: Our next question comes from the line of Michael Cyprys from Morgan Stanley.
MichaelCyprys: Good morning. Thanks for taking the question. I just wanted to go back on the D&A revenue growth target, 7% to 10% just looking out over the next couple of years. Just curious where you see the biggest opportunity within there to drive growth ahead. What — which product specifically do you think will be the biggest driver or contributor there? And is this new portion would be coming from new products versus from existing products that you’re going to drive greater penetration of the existing customer set versus new customers?
David Howson: Certainly for us, the growth in the short term, the medium term continues to be, as Fred said, sell what we’ve got, we see a great runway for selling the data products that we have internationally in particular. And then the second and third sleeve of the D&A business outside of the data and access is the index business. It’s a smaller portion of the overall but it’s growing at a very good rate with our specialization in derivative index strategy — derivative strategy benchmarks and bringing those to the marketplace. We’ve got what we think in the risk market analytics sleeve the world as global options analytics capabilities which we find greater adoption internationally for those there as well. And then when we think back to the core and basic, the access to our market continues to be high in demand and only going in one way, one direction seemingly, in particular as we broaden out that access globally.
As Chris mentioned, 2% to 3% of SPX options trade in those global trading hours. We see a solid runway to be able to expand access during those time zones and during those parts of the trading day there. So we see good ability to push out new data there. And then when we think about new data products, it’s really about packaging and bundling what we have. The great example from the 0DTE inception was the uptake of the open and closed dates which shows positions opening and closing throughout the day in the SPX options contract. That was a particularly insightful pivot on the data which we were able to provide to customers from the existing activity in the franchise. And as the franchise grows and that liquidity ecosystem grows, the demand for data and the opportunity to create innovative insights and products on that data really comes into its own.
And of course, we’ll be thinking about new technologies that we can deploy to help us generate those insights on a go-forward basis.
Christopher Isaacson: Michael, it’s Chris. I just might add here, as Dave mentioned, we’re just very, very focused on increasing access and distribution of all of our data. The Cboe Global Cloud growth has been great, especially driven outside of the U.S. And we will be pushing to use distribution mechanisms like that to get our data closer to customers where it could be a win-win for them as they want more data, not just in real time but they want data at the time of doing research, et cetera, so that they can better trade on our markets. And then the access improvements that Dave spoke about, as now we can unlock this global network because all the platform migrations are done except for Canada which is coming in March of next year.
We’ll be rolling out those access improvements first in the U.S. and then around the world. These are material upgrades in our technology platform which speaks to the power of a global network and a global platform. We can build something once and then roll it out all over the world to the benefit of our customers.
Operator: Our next question comes from the line of Alex Blostein of Goldman Sachs.
Alex Blostein: Fred, one for you. I just want to get your mark-to-market on where we are in this sort of strategic review journey you’ve guys have been on. After the decision on Cboe Digital, are there other areas where you think you guys are looking to sort of pivot away from? And if so, what could that look like? And just one follow-up for Jill. The $11 million to $15 million in annualized savings that you highlighted, is there a revenue offsetting impact as well? Or are you really speaking to the operating income effect from these changes?
David Howson: Why don’t you take the second one first?
Jill Griebenow: You bet. So the $11 million to $15 million in contemplated savings on an annualized basis is really the expense portion. So not expecting anything material from a revenue impact perspective in 2024, very consistent with what we messaged last week.
Fred Tomczyk: Okay. And then back to your first question, Alex, so I’d say in terms of the strategic review, we’re in, I call the heart of the process now. We’ve done with all of our analysis of the trends we see in the markets around the world. We’re taking a look at our SWOT analysis, our competitors and where we have strengths on a relative basis. And so we’re now starting to really get down focused, okay. So now that we know all that. We’ve taken an outside-in view of Cboe and the market in case of what we do now. So we’re getting right into the heart of the discussion and the management team. But we still have to debate that out and conclude on areas where we want to focus our time and attention. And then we have to review with the Board, obviously which will — the first round will be in the summer but there’ll probably be a second round in October because there’ll be some questions.
And I’ll — as I said the last time, we’ll probably be in a position to talk about further later this year. I just want to remind everybody that the strategy review is all about finding which areas that we want to focus our resources on to drive revenue and earnings growth which over the longer term drive shareholder value. That, combined with a disciplined capital allocation strategy, should deliver good value for our shareholders. As I said, in an exchange like ours, you have high margins, it’s a capital-light business model. And it’s all about how you allocate your resources, particularly technology and capital, to drive value for the shareholders over the longer term.
Operator: Our next question comes from the line of Kyle Voigt of KBW.
Kyle Voigt: Maybe I can just ask a question on CEDX. It sounds like you’ve realized record activity levels there in March which is good to see. I guess, can you just elaborate whether you still have incentives in place there for trading? And I’m assuming it may still be a bit of a drag on group profitability, while the business ramps and you try to gain further momentum there. I guess, any color on when we should start to see revenues and profitability ramp for CEDX?
David Howson: Thanks very much, Kyle. You rightly pointed out the record month in March for index derivatives and Q1 being up 30% year-over-year. We did revamp the liquidity provider program starting in Q2 to really refine those and focus on the type of liquidity, the concentration that we are looking for. That, along with the extension of the number of single-stock options coverage in Q1, we now cover over 90% of OI and ADV and — on the European landscape. So what it gives is a full unit of offering now with single-stock options and futures and options on our index products. We’ve got more market makers coming on board as we go through the rest of the year and we’re eagerly anticipating the knowledge of a major global retail brokerage platform in the coming months.
All that will then begin to form the core liquidity ecosystem that we’ll be able to build on, produce more sales and marketing efforts in conjunction with our customers and talk to those retail brokers that are looking to expand internationally as well as those funds that are looking to deploy capital into Europe. And so what we’ll do throughout the rest of the year is monitor those volumes and that activity in the platform progresses. And as you speak to profitability and revenues in search is worth reflecting on the fact that this is all built on top of a scaled infrastructure, the scale of infrastructure in Europe that lies on top of the largest pan-European equities exchange which is profitable, the largest cash equity clearinghouse as well.
So we’ve got scale. So the incremental investment here for us is relatively small and affords us the opportunity to be patient and continue to work with our customers to onboard to what is brand new exchange product set and clearinghouse which does take time. So it will be a journey. So we’ll be continuing to review that as we go throughout this year and into next and keep you updated with that.
Operator: Our next question comes from the line of Patrick Moley of Piper Sandler.
Patrick Moley: Just a modeling question on the buyback. Appreciate that it’s — you’re being opportunistic but it was rather large in the first quarter relative to what you’ve done recently. And it seems like it was pretty strong in April. So can you help us just kind of frame and understand the size and pace of that buyback from here? Anything you can give us would be great.
Jill Griebenow: You bet. So really in a very comfortable position from a balance sheet perspective. Paid off the last of our floating rate debt in the fourth quarter of 2023. Leverage ratio down to 1.1x here at the end of the first quarter. So the first quarter, as we’ve always — or historically mentioned is — has typically been heavier in share repurchases. So again, the first quarter this year was heavy and then also tacked on with that were some opportunistic share repurchases. So we generate a lot of free cash flow. We deploy the capital via various bells. So had a history of paying a quarterly dividend. In the past, we’ve increased that in the third quarter. We’ll take a look at that again this year. And then again, any time we sense perceived weakness in the share price, we’ll get behind it and back it for a repurchase perspective, especially given the comfortable balance sheet perspective we’re in right now.