CME Group Inc. Reports Second-Quarter 2018 Financial Results
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 rates, equity indexes, foreign exchange, energy, agricultural 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 Six Months Ended
June 30, 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 Six Months Ended
June 30, 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
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SOURCE CME Group Inc.
