Cboe Global Markets, Inc. (CBOE) Earnings Call Transcript & Summary

We're on. We're live so we'll get started here. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. Note that taking of photographs and the use of recording devices is not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. All right. We're into the home stretch here on day 3 into the afternoon of our Morgan Stanley Financials Conference. Welcome. I'm Mike Cyprys, Morgan Stanley's brokers, asset managers and exchanges analyst. We're excited to have with us here Brian Schell, Chief Financial Officer and Treasurer of the Chicago Board Options Exchange or Cboe, as it's known. Cboe is a leading provider of market infrastructure and tradable products, delivering trading, clearing and investment solutions to market participants increasingly all around the world. Brian, thank you so much for joining us here today.

Thank you for including us.

Great. So why don't we kick off with the macro? We've seen some record volume days this year, particularly during the banking turmoil. But as we approach potentially an inflection point on getting more clarity such as this afternoon on rates, although there'll be probably continued debate over the next couple of months just around where we're going to see peak terminal rates and broadly the path of the overall macro environment. So just how do you anticipate Cboe's volumes can continue to grow from here, given this macro setup? And which products do you think we might be able to see any sort of usage begin to shift?

Yes. So I think that's a terrific question. And I think the focus there as far as that growth is obviously primarily around the Options suite, right? So taking a step back and looking at all of the asset classes, many of us have seen the various equity, large equity geographies, the U.S., Canada, call it North America, Europe down 10%, 15% relative to prior year, given the turmoil and what we've seen and the invasion -- Russian invasion of Ukraine last year and some of the things that we're creating there. The other thing we're seeing up really, as you've mentioned, is the options complex, primarily index as well as FX to some extent, right, given the different central bank moves and probably competing priorities around rate and around growth and what they see in their economies. So I think what we've seen as far as the activity and where we're going is the shifting and the momentum is with the, I'll call it, the debt ceiling and other, we'll call it, more unknown events. Maybe getting a little bit more clarity, maybe people coming around more of a consensus on maybe where the Fed terminal rates are going to be. I think you're seeing a decline in the level of VIX index, right, as that 30-day forward look. And you've seen that from over the kind of high over the last 12 months of at 33, 35 level down to more of a 13, 14, 15 level that we're seeing more recently. And as you've seen that decline, you're seeing increased shifting to more VIX index options as that has become a very effective tool, right? The comprehensiveness of the suite of products that Cboe offers around risk management tools, particularly around the S&P 500 complex is very important. You're seeing that show up in the incremental VIX suite. You continue to see the incremental volume in SPX, which I know we'll spend some more time talking about. So those are some of the primary shifts we're certainly seeing at least immediately and we'd expect to see kind of that as we go forward for a lot of, I'll call it, kind of product unique dynamics.

So I want to dive in more specifically into the index option side. This has continued to demonstrate robust growth here into '23, even as volatility, generally lower year-on-year in the equity markets, which is an interesting sort of surprise still to see that growth year-on-year. So under the hood, maybe you could talk about what's driving the strength? And what gives you confidence in the sustainability of growth with specifically in the index options?

So the the primary response is, I'll call it, the diversity of the volume, right? So we have a diversity of trading strategies and a diversity of the actual clients that are using the product at the end of the day, right? So when we look at -- we see an incredibly level of consistent pattern of SPX usage, right? So we've seen a consistency of roughly 1/3 of the clients using put call spreads. We've seen the ratio, over the last 9 months of, call it, a 0.96 ratio to 1.1 over the last 9 months, right? So a pretty tight range. So we haven't seen a lot of variability, even though, as you mentioned, a significant change in the level of volatility across that market. So we see that kind of consistency, even though we've seen different levels of it. As we talk about the various strategies, what are we seeing that makes us feel confident about that, right? So we see a consistent strategy of a defined outcome, right? We're seeing a lot of people who are basically buying the short-term puts or calls at the end of the day that have a defined outcome with a small premium that they're paid. So they know what their loss is going to be if there's a loss, and then they know what their potential upside is. There's a higher delta there as far as the upside goes. We're seeing, as I mentioned earlier, a steady stream of consistency around harvesting yield off of selling spreads at the end of the day, right? So we're seeing plenty of that. We're seeing the directional -- the ability to express a directional point of view around buying a single leg put or call, again, same-day expiration, small premium but allows them to look to a specific time frame, a specific event for the utility. So that's, I'll call it, a diversity of, I'll call it, usage, given there's no concentration of strikes, there's no concentration of 1 particular strategy. And it's remained fairly consistent across different levels of the S&P 500 as well as different levels of volatility. So there's a level of people get it. They're finding flexibility in the tool. And it's not similar to, say, a meme stock kind of herd mentality that we may have seen in the past maybe as akin to some of the equity markets that we've seen maybe over prior periods. So that's what gives us some level of confidence about the sustainability and where we are. And then obviously, the client diversity, which we can talk about was -- we're still seeing plenty of that as well.

Speaking of client diversity, I guess, which customer set would you say is driving most of the growth? And we hear at some of these retail platforms such as interactive brokers and others, but maybe you could just help flesh that out a little bit.

Yes. So we could probably spend the rest of the time talking about what we're seeing around the ecosystem around these customers and this -- the virtuous cycle and the ecosystem that continues to build overall. So just a little bit of history on this, right? So as we introduced the incremental expirations based on customer feedback, based on institutional feedback, while we could really use that incremental utility of filling out the entire week. And it was more than just, yes, maybe you're getting this incremental volume we may have seen on a Monday, Wednesday, Friday, but yes, you can get -- expect that on a Tuesday, Thursday, but it actually is above that, right, because it's even exponential utility of what we're seeing, right? So when we introduced this, we saw a pretty significant pickup in the retail brokerage platforms. Again, behind a lot of these retail brokerage platforms are professional traders. Again, many of these firms are -- obviously know their client and obviously make them make sure they're right qualified to be able to invest in this. So as we look at who's doing what, what's the mix, what we're seeing is that roughly 51% market makers, you would expect roughly half, obviously, to be on the other side of that to be able to make the spreads and make that happen. You're seeing the firm side, call it 7%, what we call it the banks, right, as far as facilitating those trades. And then you're seeing the customer side, that remaining, call it, 42% that, to your point, 90% of that is the retail brokerage platforms. That's really stepped up. So we're seeing that strong participation, again, with a known risk parameter, right? There's, I think, maybe we looked at the numbers, and our best estimate is roughly 5% are doing -- are actually selling, right, the options where they're kind of exposed. And a lot of times, one would think that, that's over a covered position as we look through that. So this is something that we're seeing kind of across the board, and it's really kind of doing a nice job of feeding itself as far as what we're seeing. Now what has been the surprise or what we continue to see this grow and that uptake to your question about the clients is that as this ecosystem has continued to build and the uptake of retail, we were part of a panel, Cboe's part of a panel last week, was part of a market maker and part of a retail firm. And another part that we're seeing incremental growth in the ecosystem is a market maker said that they were -- because of the tight spreads and the improved liquidity, increasing liquidity is they were taking some of their hedging and what they were doing, some of their volume out of e-minis and they were putting it back in SPX. And so he said they found that as a more economical way to hedge their risks and their market-making activity, which again continues to increase the overall ecosystem, right? And then we're also seeing more and more folks coming in as they see this incremental volume, institutional flow starting to come in. We see people wanting to purchase open close data to start modeling their entry into it. We're seeing some clients that are more traditionally just vol trading in the VIX space incrementally add some SPX because they see the realized spread versus the implied as far as the volatility goes. So we're seeing this ecosystem grow kind of across the board, again oddly enough, initially suggested by the institution community, really picked up by the retail brokerage and now finishing off with the rest of the ecosystem with everyone else in the space.

Let's dive into that a little bit more. I think that's really important. When we think about the institutional client usage today of -- and we're talking about the SPX index options here, institutional usage or 0DTE options, I think is around 15%. But for the non-0DTE, it's more like 30%. So maybe talk about how you are engaging with these institutional investors. I think you mentioned something about data here. Maybe kind of layer that in. What are you providing? What's the time frame you think that it takes for them to do the back testing? When do you think we might be able to see some uptake accelerate? What sort of green shoots you're looking for and sort what are you hearing from customers?

Yes. So what we're seeing is that, again, they're looking at that same sustainability at the end of the day, not just the institutions but also some of the market makers. We've actually seen -- the point I did make earlier is we're seeing some of the folks who are maybe more traditional equity taking a look at options, given the liquidity and the growth in the markets and seeing a potential opportunity for their own firms to deploy capital efficiently. But from the institutional side, what they're seeing is they're seeing the base case or the business case for the flexibility to be able to more precisely dial in protection, say, through today's Fed events, for example. Whereas before the introduction of the weekly expiration on every single day of the week, they may not have been able to do for the same premium level to be able to do it and say, "I really just want to make sure I understand what's going on. I want to put my risk on for the day of the Fed announcements where they're going. I have a point of view." And so we're seeing more and more of that engagement as an incremental tool either from a pure hedging or from, like I said, a directional point of view of this is what we think we're going to be able to do to create some incremental premium at the end of the day. So we're seeing more of that. We're seeing more demand, say, for a fifth week versus the first 4 and saying, "Well, then let's take a look at that. How much of that can we leverage from the institutional market that wants more utility from its incredibly deep pool of liquidity and risk management tools that, again, continues to build upon itself?"

Sticking with the index options, let's come back to retail. You guys are waiting for FINRA approval on the XSP options to be written on SPY. So maybe you could just give us some context around, how are you thinking about that opportunity set? Why are you taking those steps? And how are you thinking about the overall path forward from here?

And so we're quite excited about this, and this is just a market structure improvement, we'll call it, because our broader approach, which we embarked on a couple of years ago was how do we improve access at the end of the day, right? So improving access both through trading hours so we expanded global trading hours. How to improve access to the foreign jurisdictions to be able to say they're here? How do we do it through contract size so we make it easier to digest? And so as we look at expanding that, increasing that access, again in the last part of that being the number of expirations, so on that notional size, we knew that this is a -- can be a terrific product in a smaller notional size for that more traditional retail platform user that can utilize it, right, because it's 1/10 the size. And the problem was with the XSP contract and a lot of them have an underlying SPDR position, for example, right, is they want to maybe overwrite that. Maybe they want to have some yield harvesting on it with a covered option. And the problem was the margin treatment at the firm because of the OCC said, "Oh, those are 2 different naked positions. Those do not offset." In reality, they obviously do. So the SEC approved that treatment. Now we're waiting for FINRA to be able to approve that treatment. So we're going to see -- the client is going to see incredible margin compression and, again, capacity that allows them to basically leverage what they already have in their account. And this is something we're working on 12, 18 months because we knew the utility of that margin treatment was important and allows us, yet again, an incremental educational tool around the benefit of a cash-settled option, the margin treatment and the tax benefit we thought really make this a very nice tool to utilize to be able to change their profitability profile with the use of this option.

Any sense on timing for the approval? Could that be a '23 event or is that...

We're very hopeful it's '23. We're very hopeful it's shorter than longer, for sure. Again, it's hard to predict regulatory approvals on a couple of things that we've had in the hopper. But this 1 we definitely expect in '23.

And just looking through to ones you ultimately -- if assuming you get the approval, what's the go-to-market strategy from that, just in terms of is there any tech build required on the part of platforms? How do you sort of enable it? And how can you help sort of make it more seamless and easy for that end customer to be, one, aware that this is available and to then actually execute on that?

Yes. So this will be, I'll call it, joint, and each brokerage firm will be slightly different. Most of the retail brokerage platforms are -- their systems allow for cash-settled options. There's still a couple of larger ones that do not, but we've been told that they're working towards that in, say, call it, the next 12, 24 months, whatever their time frames are. Not for me to comment on but they've told that they're interested. They've seen the utility that these options can have. A lot of times, it's more of a back office and the overall margin treatment. And as far as their risk controls that they put on the various accounts based on their risk designation. So it should be, for many of these firms, pretty quick to be able to implement. So our go-to-market approach is, I'll call it, joint marketing, make sure they understand the benefits of index options, cash-settled options, again, the tax benefit and the lack of having to manage the underlying asset and be worried about it being sold out from under you because you may not have managed that, closed out that position with a normal noncash-settled option, and therefore, also potentially creating another adverse tax consequence, like say, your underlying having to be sold out. So like I said, marketing dollars with that in advance working in conjunction with the retail brokerage platforms, and we're very excited about that rollout.

Great. Maybe just more broadly on product development. Maybe just talk to the overall process at your Cboe Labs around product development. How do you sort of approach it? And what else is in the pipeline?

Yes. So again, a long history of innovation with first listed, first index, first flex leaps. There's a long history of that and then, obviously, with most recently with the contracts expiring every day. So Labs was meant to try to harness that innovation more centrally, a little bit more organized and focused with primarily derivatives focus on innovation. They do touch some other items. We did help support and you may have seen the press release on secured financing transactions that we're doing in our Cboe Clear Europe. But the focus here has been on derivatives and really that complex suite, right? So they recently issued the 1-day VIX Index that came out. One of the things in their pipeline is how do they -- they're working on developing what becomes the tradable product. Right now, it's just an index that's not tradable. How do you develop and how do you create a tradable product based on that 1-day VIX, right? So that's a big part of their mandate and what they're doing there. Developing dispersion index, right, is a big part of taking something that exists, call it, OTC and bringing that into the futures market and being able to help clients from a capital standpoint. Variance futures, right? Moving that bilateral OTC trade, potentially on exchange, again helping out with capital treatment and having those returns and better being able to manage some of those things. And finally, as part of the more R&D but any more, not as much, has been around tokenization, working with digital asset. I think I mentioned a couple of other press reports and looking at how do we make capital markets even more efficient, kind of leaning into a little bit of that digital asset. So they've got a lot in their pipeline. And then I guess I'll conclude with other pipeline items for that team is options on our various futures products, including VIX futures and the iBoxx products that we have.

Great. Why don't we shift gears and talk about Data and Access Solutions? You recently reiterated your 7% to 10% organic growth guide for the DnA part of the business for '23. First quarter though was a little bit slower, but you pointed to some upcoming initiatives that should help reaccelerate growth into the back half of the year. So maybe you could just walk through some of those initiatives. Which one do you think are going to be most additive to really drive that reacceleration? And what sort of traction are you seeing so far?

Yes. So I would say as far as that broader plan for second half and then into '24 is we've kind of talked about the launch of the Cboe One products, started out with U.S. equities markets. We add in Canada looking to add options. And so we see that having some real traction on a go-forward basis at some point when that kind of looking for those approvals and client uptake. So that's 1 element that we see helping to build some of the growth. The recent migration in Australia of the technology trading platform. A lot of times when we see a technology platform, we will see an accompanying incremental request for market data and access based on the new technology. We are looking -- and that was completed in March. We have scheduled for Japan for November. Again, that's probably more of a '24 as far as the impact we'll see in the DnA business. We see continued cloud momentum as far as what we're seeing there, as far as being able to hook in, capturing the cloud data. The other that we see is -- and this is a little bit more of looking specifically into the pipeline as far as looking at clients, when we see contracts coming on board, is our continued index work around creating indices for various asset managers, participating in some of the AUM as a piece of that as far as the licensing fee goes. We're seeing distribution as a service as part of that, as seeing incremental benefit coming online there. And then the risk management analytics, which is kind of part of one of the acquisitions we made early on in 2020 that essentially is looking to really deploy that analytics framework that we have, helping to value, understand your pre-trade, post-trade kind of risk position. And we're seeing global pickup of that product overall. And then you mix in a little bit of price, you have a projection for the second half that we think gets us to that targeted range that we guided to earlier in the year.

Any sort of risk to the upside or downside around that? How are you feeling about that?

No, I mean, that's something that it was -- and this was something I should have been clear, mea culpa here, is that this is actually perfectly consistent with our plan. I probably should have just given everybody a heads-up, "Hey, the first half is going to be a little bit lighter." This is all very much right with where we thought things were going to happen as far as the growth was going to occur was poor second half loaded and which is one of those messages that I should have addressed prior to the quarter. So you're still feeling confidence from the team that we're going to hit that guidance level.

So the 1Q DnA revs were not -- the softness there, at least to the Street perception, was not a surprise to you?

Correct, which is shame on me, I should have done a better job of setting that expectation. But at the end of the day, we know that's why we needed to make sure that the Street and you knew that we're good. This is what we're still planning for the second half of the year.

Fair enough. Maybe just more longer term, what do you envision for Data and Access Solutions in terms of overall growth? Where do you see the biggest opportunities? The medium-term targets would seem to suggest that you believe you're underpenetrated, which some would view as maybe a surprise for largely mature end markets and cash equities and derivatives. So just curious how you're thinking about that.

Yes. So that's a -- that's 1 point of view. So what -- the way we think about it is the most valuable data is the most unique data, and it can be the most usable as far as helping them trade efficiently. So we know that some of the most valuable data we have is that U.S. data, particularly around proprietary products. So we still see that as a huge driver of future growth at the end of the day, right? So there's this new thing with the Open-Close data, which we just did off of SPX. That's a brand-new revenue stream that people hadn't even thought of last year at the end of the day, right? We looked at it like people want to understand. They want to understand the model. There's a separate stream of data that now can be purchased to just look at that as far as helping them model, understand the exposure, how it works with 0DTE. So as we think about that still being the most valuable, we still believe the most valuable part and where the growth is going to come from is that U.S. data that is going to be requested not just domestically but then internationally as well, call it, the nondomestic entities, right? We've talked about briefly that we see a lot of retail brokers' platforms going into a lot of the foreign jurisdictions that we actually entered into not too long ago, right? We're seeing Australia, Japan, Canada, Hong Kong. And based on our conversations with a lot of those retail brokerage platforms, we know they're expanding there not necessarily to create growth of those domestic products but access to the U.S. products. And so we believe that nondomestic access to that data, to that access, to those products, we think, can be very, very powerful. And we still think that has a lot of legs and a lot of momentum on a go-forward basis.

And that's more on the derivative side than the...

That's more on the derivative side, correct.

Okay, all right. Why don't we go around the world? Let's start with Europe, just given the expanding footprint that you have at Cboe these days, although Europe, you've been in for some time with Bats. But European Derivatives, that's new for you guys. Activity there has more than doubled year-on-year in the first quarter. You're expecting to launch single stock options on European companies in November. So what's your long-term aspirations for the European Derivatives market? How competitive is that? And what edge would you say you have versus some of the local peers?

Yes. It's definitely a competitive market, right? There's definitely some entrenched -- there's some terrific products there with the exchanges they have today. But our goal is actually not to take share from them, so to speak, is to offer -- is to actually grow the pie for that community. And it's really more of what our offering is, not so much is a replica of a similar index that closely replicates the exposure. It's more about a market structure enhancement around, I'll call it, more screen-based liquidity versus, call it, upstairs and that you can't necessarily access. So it's screen-based liquidity and being able to trade similar to the U.S. And the other 1 is being able to offer a clearing solution that is centralized that gives you a pan-European approach. So it's really those 2 elements are the key themes behind offering the indices as well as single stock options.

Maybe moving on to APAC. In March of this year, you completed the tech migration of Cboe Australia. You alluded to that earlier. You launched Cboe BIDS in Australia. So what's the opportunity set ahead in Australia and elsewhere within APAC?

Yes. So we're excited about Australia because we've actually seen market share growth even before the migration. Now we're continuing to see that migration, which is somewhat unusual for -- except unless you're, I guess, Cboe, and that sounds a bit cocky. But we've seen that with this technology team to be able to just like -- just assume a technology migration is going to happen. But we've done it every single time, and they delivered exactly what they said they were going to deliver, when they said they were going to deliver without much of a blip, if any at all. So we're seeing incremental growth in the data side. We're seeing incremental market share. And so we're very excited about the incremental, I'll call it, data execution, execution consulting that we're bringing to that market, saying, "Here's why this venue, you can do better on your execution costs." And looking at the pure data as far as their own trading data, and like I said, helping improve where they're going and the analysis of what they see. And I think there's positive regulatory tailwinds of encouraging more and more competition in the Australian market.

How do you think about the longer-term market share opportunity there? Would you envision -- and maybe this is a question across the world, too, but would you envision taking your market share that you have in the U.S. and cash equities and options and seeing that you can get to that overseas?

I think there's definitely a possibility, right? So I think as we continue to potentially grow our listings franchise, right, across the board. I'm not saying that, that's immediate, but as you know, with listings, when you have a listings, you tend to attract -- obviously, you can get auctions volume, you tend to attract a little bit more volume around the listings franchise itself. I think we talked about the incremental data and the approach. It's the same thing going on in Japan as far as we have the technology migration coming up. I think you have it even more, I'll call it, regulatory tailwind as far as encouraging competition, BZX. And the regulatory community there has been very supportive of continuing to facilitate competition to improve overall market dynamics. And as you know, in the history and where we come from, we embrace that competition and we think we do well. And so we'll continue to see that growing. Same thing for Canada is that with that network effect of adding BIDS, adding market structure, adding incremental listings, adding all of those elements, we think, continues to help drive market share broadly across the board.

Well, you addressed my next question on Canada. So why don't we move on to expenses? You're currently guiding to expense growth of 19% at the midpoint for this year. What are some of the key investment initiatives you guys are focused on that's driving that robust expense growth?

Yes. So one of them is -- unfortunately, is outside of our core is -- has been the CAT. CAT has been a big part. And as a little bit smaller exchange relative to some of our peers as far as the actual P&L, it's becoming a bigger percentage of our overall growth rate. We're hoping that diminishes over time as far as the actual growth rate as that gets to, I'll call it, steady state.

CAT being the Consolidated Audit Trail?

Consolidated Audit Trail, exactly. So thank you for that. So that's being kind of an unusual 1 we called out. As far as the overall investments, right, so we're ramping up our marketing, some of which I talked about with XSP, with our rebranding exercise. We have a little bit of celebration in there as far as the 50th anniversary and really leaning into that, trying to introduce Cboe to some of the other jurisdictions that may not be as familiar with, particularly with the launch of the index products, XSP and the joint marketing that we're seeing around there. We're seeing incremental growth in some of our sales force around DnA and derivatives. And then finally, I talked about listings a little bit, right? You have to do a little bit of investing to some folks to get that up and going and then some of the R&D efforts that we talked about. Again, over the next 1, 2, 3 years, we expect to see that revenue starting to chunk in, similar to what we did when we started in '21 seeing that revenue growth starting to hit last year and this year.

How do you think about the pace of expense growth, that 19% expense growth? How do you see that trending as you look out over the next couple of years? Is a double-digit expense growth in the cards possible, viable for '24?

If we see it going -- the growth rate going down at the end of the day, right? So we expect to see -- we've had some high conviction initiatives that we wanted to engage in. We felt very strongly about getting them started and making -- getting some traction and getting that going. We feel like we've made terrific progress and we expect to see the rate of that growth to decline going into '24.

And what is the scope for margin expansion in the coming years? Is that something we could see in '24?

That is something that we would be targeting would be expansion in '24.

That's bold.

At the end of the day, right, so if the high conviction expense targets -- expense and what we're doing and around the revenue growth, so if we can maintain a similar level of revenue growth and if we can actually curtail the growth rate of the expenses, again, I'm going kind of by math definition is that our goal would be to have margin expansion. And you've seen that, right? We've been very clear about our desire to want to invest. We want to grow. We're going to sacrifice a little bit of margin along the last couple of years. But ultimately then, we need to turn that into margin expansion. And taking a look at it, we'll give that assessment. We'll provide that guidance when appropriate. But at the end of the day, if that expense growth rate is -- diminishes and we maintain that revenue growth rate, we would expect to see margin expansion.

Great. Maybe we shift and talk about M&A, a little bit of time left here. You've done a range of acquisitions over the last couple of years. Maybe just give us a sense of, is there anything outstanding left for you guys to do? And how you're feeling about the integration and digesting what you have done so far?

So we'll take this in reverse order. So I think on the integration side, right, that's why we do M&A is that we don't just -- we're just not a portfolio organization holding company. I think what we look at is if we're going to do this, it's -- we're going to integrate not only the matching engine, which is critical to the front end, the revenue, but that allows us then to get the global network effect of being able to link in BIDS. Global clients understanding that if I trade this, I understand how the system works subject to the various regulations in Australia, as is in Canada, as is in the U.S. as it is and then Japan eventually. And then also then with the BIDS and the efficiency, it gives us supporting the network across the globe, obviously shows up in the margins at the end of the day. And then you go through then the back office, right, whether it be the GL, the Workday, the payroll systems, all of those things also then have a little bit of a tail that we would expect to be fully completed here by the end of this year. As far as the M&A front, we're always going to look at something or anything that's going to continue to add shareholder value, that we think that's within our core where we compete in an open market that we can compete in. And basically, the asset classes that we're in that makes sense, right, around that spot, spot cash, the derivatives and the DnA that makes sense that we continue to drive the growth of the business.

Transformative M&A, is that in the cards anytime soon? We saw some others this week.

We did see some others this week. And look, it's -- we don't need to go out and do a transformative M&A. We like the path that we're going on. I can't say that, that's never going to happen in the future. But basically, right now, we're happy with the organic growth and executing on what we've done.

Maybe in the last 40 seconds we have left, buybacks, you guys were a bit more active in the first quarter. Can we expect that, that could persist into the rest of this year? How are you feeling on buybacks?

Yes. So I would say that what we've always done is that share buybacks have always been an opportunistic approach for us, is that you can look at our trading metrics relative to peers based on expected cash flows, the belief of the sustainability around what we're doing and everything else there. So our capital priorities have not changed, and we will continue to buy back shares opportunistically, looking to always grow our dividend annually and make sure that we fund our organic activities.

Great. We'll have to leave it there. Thank you very much, Brian.

Thank you.