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CME Group Inc. Reports Second-Quarter 2018 Financial Results

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CME Group Inc. Reports Second-Quarter 2018 Financial Results

- Second-quarter 2018 revenue increased 15 percent compared with second-quarter 2017

- GAAP diluted earnings per share increased 36 percent and adjusted diluted earnings per share were up 41 percent compared with second-quarter 2017

PR Newswire

CHICAGO, July 26, 2018 /PRNewswire/ -- CME Group Inc. (NASDAQ:CME) today reported revenue of $1.06 billion and operating income of $667 million for the second quarter of 2018.  Net income was $566 million and diluted earnings per share were $1.66.  On an adjusted basis, net income was $591 million and diluted earnings per share were $1.74.  Financial results presented on an adjusted basis for the second quarters of 2018 and 2017 exclude certain items, which are detailed in the reconciliation of non-GAAP results.1

"With double-digit growth in five of our six asset classes, Q2 2018 was our second best quarter ever in average daily volume, following record performance in the first quarter of 2018," said CME Group Chairman and Chief Executive Officer Terry Duffy. "We continued to see strong global growth as our trading volume increased 30 percent in Asia and 9 percent in Europe.  Total revenue grew 15 percent and, along with our continued focus on expense discipline, resulted in margin expansion and an adjusted earnings per share increase of more than 40 percent."

1. A reconciliation of the non-GAAP financial results mentioned to the respective GAAP figures can be found within the Reconciliation of GAAP to non-GAAP Measures chart at the end of the financial statements and earnings presentation materials.

Second-quarter 2018 average daily volume was 18.4 million contracts, up 12 percent compared with second-quarter 2017.  Clearing and transaction fee revenue was $906 million, up 14 percent compared with second-quarter 2017.  Second-quarter 2018 total average rate per contract was $0.757, compared with $0.706 in first-quarter 2018, driven primarily by an increase in the proportion of the business from higher priced commodity products.  Market data revenue was $114 million, up 18 percent compared with the second quarter last year.

As of June 30, 2018, the company had $1.2 billion of cash and marketable securities, excluding $1.6 billion held in escrow related to the potential NEX Group plc acquisition, and $3.4 billion of long-term debt.  The company paid dividends during the second quarter of $237.6 million.  The company has returned more than $10.1 billion to shareholders in the form of dividends since implementing the variable dividend policy in early 2012.

CME Group will hold a Q&A conference call to discuss second-quarter 2018 results at 8:30 a.m. Eastern Time today.  A live audio Webcast of the Q&A call will be available on the Investor Relations section of CME Group's Web site at www.cmegroup.com.  An archived recording will be available for up to two months after the call.

As the world's leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) is where the world comes to manage risk.  CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest ratesequity indexesforeign exchangeenergyagricultural products and metals.  Around the world, CME Group brings buyers and sellers together through its CME Globex® electronic trading platform.  CME Group also operates one of the world's leading central counterparty clearing providers through CME Clearing, which offers clearing and settlement services across asset classes for exchange-traded and over-the-counter derivatives.  CME Group products and services ensure that businesses around the world can effectively manage risk and achieve growth.

CME Group, the Globe logo, CME, Chicago Mercantile Exchange, Globex and E-mini are trademarks of Chicago Mercantile Exchange Inc.  CBOT, Chicago Board of Trade, are trademarks of Board of Trade of the City of Chicago, Inc.  NYMEX, New York Mercantile Exchange and ClearPort are trademarks of New York Mercantile Exchange, Inc.  COMEX is a trademark of Commodity Exchange, Inc.  Dow Jones, Dow Jones Industrial Average, S&P 500 and S&P are service and/or trademarks of Dow Jones Trademark Holdings LLC, Standard & Poor's Financial Services LLC and S&P/Dow Jones Indices LLC, as the case may be, and have been licensed for use by Chicago Mercantile Exchange Inc.  All other trademarks are the property of their respective owners.

Statements in this press release that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. We want to caution you not to place undue reliance on any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Among the factors that might affect our performance are increasing competition by foreign and domestic entities, including increased competition from new entrants into our markets and consolidation of existing entities; our ability to keep pace with rapid technological developments, including our ability to complete the development, implementation and maintenance of the enhanced functionality required by our customers while maintaining reliability and ensuring that such technology is not vulnerable to security risks; our ability to continue introducing competitive new products and services on a timely, cost-effective basis, including through our electronic trading capabilities, and our ability to maintain the competitiveness of our existing products and services, including our ability to provide effective services to the swaps market; our ability to adjust our fixed costs and expenses if our revenues decline; our ability to maintain existing customers, develop strategic relationships and attract new customers; our ability to expand and offer our products outside the United States; changes in regulations, including the impact of any changes in laws or government policy with respect to our industry, such as any changes to regulations and policies that require increased financial and operational resources from us or our customers; the costs associated with protecting our intellectual property rights and our ability to operate our business without violating the intellectual property rights of others; decreases in revenue from our market data as a result of decreased demand; changes in our rate per contract due to shifts in the mix of the products traded, the trading venue and the mix of customers (whether the customer receives member or non-member fees or participates in one of our various incentive programs) and the impact of our tiered pricing structure; the ability of our financial safeguards package to adequately protect us from the credit risks of clearing members; the ability of our compliance and risk management methods to effectively monitor and manage our risks, including our ability to prevent errors and misconduct and protect our infrastructure against security breaches and misappropriation of our intellectual property assets; changes in price levels and volatility in the derivatives markets and in underlying equity, foreign exchange, interest rate and commodities markets; economic, political and market conditions, including the volatility of the capital and credit markets and the impact of economic conditions on the trading activity of our current and potential customers; our ability to accommodate increases in contract volume and order transaction traffic and to implement enhancements without failure or degradation of the performance of our trading and clearing systems; our ability to execute our growth strategy and maintain our growth effectively; our ability to manage the risks and control the costs associated with our strategy for acquisitions, investments and alliances;  our ability to continue to generate funds and/or manage our indebtedness to allow us to continue to invest in our business; industry and customer consolidation; decreases in trading and clearing activity; the imposition of a transaction tax or user fee on futures and options on futures transactions and/or repeal of the 60/40 tax treatment of such transactions; our failure to maintain our brand's reputation; the unfavorable resolution of material legal proceedings and the uncertainties of the ultimate impact of the Tax Cuts and Jobs Act.  For a detailed discussion of these and other factors that might affect our performance, see our filings with the Securities and Exchange Commission, including our most recent periodic reports filed on Form 10-K and Form 10-Q.

 

 

CME Group Inc. and Subsidiaries
Consolidated Balance Sheets
(in millions)








June 30, 2018


December 31, 2017

ASSETS





Current Assets:





Cash and cash equivalents


$

1,098.9



$

1,903.6


Marketable securities


80.9



90.1


Accounts receivable, net of allowance


433.9



359.7


Other current assets (includes $1,635.5 and $0 in restricted cash)


1,801.6



367.8


Performance bonds and guaranty fund contributions


36,885.2



44,185.3


Total current assets


40,300.5



46,906.5


Property, net of accumulated depreciation and amortization


380.0



399.7


Intangible assets—trading products


17,175.3



17,175.3


Intangible assets—other, net


2,299.0



2,346.3


Goodwill


7,569.0



7,569.0


Other assets (includes $1.4 and $2.4 in restricted cash)


1,475.5



1,394.4


Total Assets


$

69,199.3



$

75,791.2


LIABILITIES AND EQUITY





Current Liabilities:





Accounts payable


$

27.8



$

31.3


Other current liabilities


266.6



1,456.3


Performance bonds and guaranty fund contributions


36,885.2



44,185.3


Total current liabilities


37,179.6



45,672.9


Long-term debt


3,419.0



2,233.1


Deferred income tax liabilities, net


4,863.1



4,857.7


Other liabilities


614.0



615.7


Total Liabilities


46,075.7



53,379.4


Shareholders' equity


23,123.6



22,411.8


Total Liabilities and Equity


$

69,199.3



$

75,791.2


 

CME Group Inc. and Subsidiaries
Consolidated Statements of Income
(dollars in millions, except per share amounts; shares in thousands)








Quarter Ended
June 30,


Six Months Ended
June 30,



2018


2017


2018


2017

Revenues









Clearing and transaction fees


$

906.1



$

792.0



$

1,879.7



$

1,584.0


Market data and information services


113.8



96.1



208.7



192.9


Access and communication fees


26.2



24.9



52.2



49.2


Other


13.5



11.6



28.0



27.8


Total Revenues


1,059.6



924.6



2,168.6



1,853.9


Expenses









Compensation and benefits


150.8



139.7



303.5



282.3


Communications


5.9



6.0



11.8



12.3


Technology support services


19.3



18.2



38.9



36.9


Professional fees and outside services


31.9



28.6



74.5



57.2


Amortization of purchased intangibles


23.6



24.0



47.3



48.0


Depreciation and amortization


27.5



28.8



55.6



58.2


Occupancy and building operations


20.2



19.2



40.2



39.3


Licensing and other fee agreements


39.9



32.9



89.4



66.7


Other


73.6



22.0



99.6



46.9


Total Expenses


392.7



319.4



760.8



647.8


Operating Income


666.9



605.2



1,407.8



1,206.1


Non-Operating Income (Expense)









Investment income


241.9



112.4



398.3



251.3


Interest and other borrowing costs


(33.1)



(29.0)



(63.2)



(58.8)


Equity in net earnings of unconsolidated subsidiaries


36.4



31.8



76.5



62.6


Other non-operating income (expense)


(155.3)



(83.1)



(273.9)



(116.9)


Total Non-Operating Income (Expense)


89.9



32.1



137.7



138.2


Income before Income Taxes


756.8



637.3



1,545.5



1,344.3


Income tax provision


190.7



221.5



380.6



528.7


Net Income


$

566.1



$

415.8



$

1,164.9



$

815.6


Earnings per Common Share:









Basic


$

1.67



$

1.23



$

3.43



$

2.41


Diluted


1.66



1.22



3.42



2.40


Weighted Average Number of Common Shares:









Basic


339,465



338,556



339,386



338,448


Diluted


340,872



340,020



340,838



339,974


 

CME Group Inc. and Subsidiaries
Quarterly Operating Statistics














2Q 2017


3Q 2017


4Q 2017


1Q 2018


2Q 2018

Trading Days


63



63



63



61



64



















Quarterly Average Daily Volume (ADV)
CME Group ADV (in thousands)












Product Line


2Q 2017


3Q 2017


4Q 2017


1Q 2018


2Q 2018

Interest rate


8,210



7,424



7,970



11,948



9,200


Equity


2,707



2,624



2,632



4,096



3,086


Foreign exchange


879



971



941



1,100



1,035


Energy


2,632



2,693



2,489



2,754



2,630


Agricultural commodity


1,491



1,381



1,278



1,593



1,734


Metal


533



611



616



713



674


Total


16,453



15,704



15,925



22,204



18,359


Venue











Electronic


14,582



14,264



14,265



19,796



16,644


Open outcry


1,115



889



1,066



1,556



1,066


Privately negotiated


756



551



594



851



649


Total


16,453



15,704



15,925



22,204



18,359



Average Rate Per Contract (RPC)
CME Group RPC











Product Line


2Q 2017


3Q 2017


4Q 2017


1Q 2018


2Q 2018

Interest rate


$

0.491



$

0.485



$

0.467



$

0.464



$

0.491


Equity


0.731



0.738



0.768



0.781



0.797


Foreign exchange


0.807



0.796



0.785



0.762



0.741


Energy


1.096



1.072



1.133



1.140



1.142


Agricultural commodity


1.300



1.251



1.251



1.246



1.274


Metal


1.449



1.376



1.315



1.367



1.403


Average RPC


$

0.749



$

0.749



$

0.736



$

0.706



$

0.757


 

 

 

CME Group Inc. and Subsidiaries

Reconciliation of GAAP to non-GAAP Measures

(dollars in millions, except per share amounts; shares in thousands)












Quarter Ended
June 30,


Six Months Ended
June 30,



2018


2017


2018


2017

Net Income


$

566.1



$

415.8



$

1,164.9



$

815.6











Restructuring and severance


0.3



2.1



1.7



3.9











Amortization of purchased intangibles


23.6



24.0



47.3



48.0











Litigation matters


1.4





10.3













Acquisition-related costs(1)


4.8





14.3













Foreign exchange transaction (gains) losses(2)


47.3



(4.6)



48.9



(7.1)











Acceleration of contractual commitments


0.7





0.7













Unrealized and realized gains on CME Ventures investments


(88.2)





(89.3)













Gains on sale of BM&FBOVESPA shares








(86.5)











Loss on disposal of assets




0.6





0.6











Loss on derivatives


36.9





36.9













Debt costs related to acquisition


3.5





3.5













Income tax effect related to above


(6.2)



(9.1)



(15.5)



(18.0)











Other income tax item


1.2



(9.9)



1.2



77.9











Adjusted Net Income


$

591.4



$

418.9



$

1,224.9



$

834.4











GAAP Earnings per Common Share:









     Basic


$

1.67



$

1.23



$

3.43



$

2.41


     Diluted


1.66



1.22



3.42



2.40











Adjusted Earnings per Common Share:









     Basic


$

1.74



$

1.24



$

3.61



$

2.47


     Diluted


1.74



1.23



3.59



2.45











Weighted Average Number of Common Shares:









     Basic


339,465



338,556



339,386



338,448


     Diluted


340,872



340,020



340,838



339,974













1.

Acquisition-related costs include professional fees related to the proposed acquisition with NEX Group plc.

2.

Results include foreign exchange transaction net gains and losses principally related to cash held in British pounds within entities whose functional currency is the U.S. dollar.

CME-G

 

Cision View original content:http://www.prnewswire.com/news-releases/cme-group-inc-reports-second-quarter-2018-financial-results-300686941.html

SOURCE CME Group Inc.

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