Miami International Holdings, Inc. 2026 Q3 Earnings Call

Thank you, Gary. Good afternoon, and thank you for joining us for MIAX's third quarter 2026 earnings conference call. I am John T. Williams, Head of Investor Relations. With us today are Thomas P. Gallagher, Chairman and Chief Executive Officer, and Lance Emmons, Chief Financial Officer. We will also have Douglas Schafer, Jr., Chief Information Officer, and Shelly Brown, Chief Executive Officer of MIAX Futures and Chief Strategy Officer of MIH, joining us for the Q&A session following our prepared remarks. Our earnings announcement was released prior to this call, and we have published an accompanying slide presentation on our investor relations website at ir.miaxglobal.com. In addition, this call is being webcast, and an archived version will be available there shortly after the conclusion of the call.

Our discussion today includes forward-looking statements that are based on the expectations, estimates, and projections regarding the company's future performance, anticipated events or trends, and other matters that are not historical facts. The forward-looking statements in our discussion are subject to various assumptions, risks, uncertainties, and other factors that are difficult to predict and which could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These statements are not guarantees of future performance and therefore you should not place undue reliance on them. We refer you to our earnings press release and filings with the SEC for a more detailed discussion of the risks and uncertainties that could impact the future operating results and financial condition of MIAX's.

We do not intend to update any forward-looking statements made on this conference call to reflect events or circumstances after today or to reflect new information or the occurrence of unanticipated events, except as required by law. During today's call, we will refer to non-GAAP measures as defined and reconciled in our earnings materials. With that, I will now turn the call over to Tom.

Thanks, John, and good afternoon, everyone. Thanks for joining us. We had a solid third quarter. Net revenue grew 20% year-over-year. We gained market share, and we meaningfully expanded margins while investing in the business. We also made real progress on the futures side, including getting retail distribution for our Bloomberg products underway. Three things stood out this quarter. First, our options business continued to grow. Net revenue was $131 million, up 20% year-over-year, and options market share increased to 17.4%. Second, we continue to operate the business efficiently. Adjusted EBITDA was $71 million and Adjusted EBITDA margin was 54%, up more than 1,000 basis points year-over-year. Notably, we made that progress while continuing to invest in our options business and our Bloomberg Financial Futures suite. Third, we continued to execute our futures business strategy.

In mid-October, we announced NinjaTrader as the first retail broker distributing our Bloomberg Financial Futures products, an exciting initial milestone. Last week, we launched four new physically settled futures contracts on MIAX Futures. Let me frame how we're thinking about recent industry trends. Three things are reshaping our industry. Growing retail investor interest in derivatives, a pipeline of large IPOs that expands the opportunity for options, and a regulatory environment that continues to evolve. All three should reward a company that stays disciplined and ready to move. Lance, can you, maybe go to yours real quick? I'm just having a little allergy here.

Yeah, absolutely, Tom. It's that time of year. Thanks, everyone. Thanks for joining us. Third quarter net revenue was $131 million, up 20% from the prior year period. We continued to manage expenses carefully. Adjusted operating expenses were $60 million compared to $62 million a year ago, roughly flat year-over-year, and a growth rate well below our revenue growth. We are continuing to invest in new products but are doing it on a largely fixed cost base, and we remain disciplined. As mentioned, Adjusted EBITDA was $71 million, and Adjusted EBITDA margin was 54%, compared to 44% in the third quarter of last year. That's 1,000 basis points of year-over-year margin improvement as we continue to generate operating leverage tied to revenue growth with high incremental margins. Adjusted earnings were $50 million, up 25% year-over-year, and adjusted diluted EPS was $0.45.

Now let's discuss our Q3 segment performance. Options segment net revenue was $113 million, up 19% year-over-year. Average daily volume of 11.1 million contracts grew 15% year-over-year, slightly outpacing industry ADV growth. Options segment net revenues were driven by an increase in both net transaction fees and non-transaction fees. Growth in net transaction fees reflected higher industry ADV and market share, partially offset by lower revenue per contract. Non-transaction fee revenue growth of 38% was primarily due to increased member connections, our January 1, 2026 fee increases, and market data sales. For 2027, we plan to increase our access fees by approximately 10% effective January 1.

Q3 2026 included approximately $2 million in historical data sales from new products introduced earlier this year, similar to what we saw in Q1 and Q2. While this revenue has now materialized each quarter this year, the amount can vary meaningfully, so we suggest modeling it conservatively. Turning to market share and RPC. Q3 options market share was 17.4%, compared to 17.2% in the third quarter of last year and 16.5% last quarter. Q3 RPC was $0.098, compared to $0.124 in Q2 and $0.11 in Q1. Recall that back in August, we discussed the factors expected to shape our second half RPC, while noting that Q2 RPC was an outlier.

With that in mind, the step-down in options RPC from $0.11 in Q1 2026 to $0.098 in Q3 2026 was driven by three factors: pricing changes we made during the quarter, the change in ORF effective July 1st, and several mix factors which largely offset each other. Capture rates are always difficult to project, especially in the short term. But we are comfortable with our approach to pricing, and our focus remains on optimizing revenue. We will continue to make adjustments to ensure RPC and market share remain in a healthy balance over time. Our Equity segment net revenue was $7 million, up from $4 million in the prior year period, mainly due to higher net transaction fees. Equity's capture was positive as compared to inverted in the year-ago period. Futures segment net revenue was $5 million, up 4% compared to the prior year period.

Our Bloomberg Financial Futures products launched in May and did not contribute materially to our overall Q3 results, though segment Adjusted EBITDA continues to reflect our investment in launch incentive programs. International segment net revenue was $6 million, up 11% year-over-year. We continue to streamline sales and marketing efforts across our international listings business, which we believe offers attractive long-term upside. Turning to our balance sheet. We ended the quarter with cash and cash equivalents of $699 million and outstanding debt of less than $2 million, which matures in December. Our significant cash balance is a strength, and we will remain judicious in our deployment of capital while staying open to disciplined opportunities that fit our strategy. Now let's discuss our updated 2026 guidance. Full details, including comparison to our prior guidance, can be found on slide 17 of the earnings deck.

With one quarter remaining of the year, we are lowering our full-year 2026 adjusted operating expense guidance range to between $254 million and $257 million. That compares to the prior $260 million to $270 million range and reflects our continued careful expense management in Q3 and over the course of the year. Our expense expectations for Q4 include a planned increase in marketing cost, including Bloomberg Futures quoting incentives. We now expect our full-year share-based compensation expense in a range between $30 million and $32 million, narrower from the prior $29 million to $32 million range. We expect full-year capital expenditures in a range between $43 million and $46 million versus the prior $40 million to $45 million range. We chose to pull forward some planned 2027 CapEx to mitigate expected cost increases, similar to what we did earlier this year.

We expect depreciation and amortization in a range between $36 million and $38 million, narrower from the prior range of $35 million to $39 million. Our Q3 adjusted effective tax rate was 26%, and we now expect our full-year rate will be in the 26%-28% range versus the prior 27%-29% range. Looking ahead, we remain confident in our ability to expand margins over time as revenue grows against a largely fixed cost base and as our new products scale. On that, turn it back over to you, Tom.

Great. Thank you, Lance. I'm going to have Shelly also talk a little bit about some of our options strategy in a moment or two. We continue to execute on the strategy that has really driven our success, and that's building, launching, and operating high-performance exchanges. Today, that means bringing competition to retail financial futures with Bloomberg, meeting institutional demands in our agricultural futures franchise, and rolling out new functionality on our options exchanges. Shelly, why don't you talk to us a little bit now about the options business, then I'll pick up with the next one.