10-KPeriod: FY2016

CME GROUP INC. Annual Report, Year Ended Dec 31, 2016

Filed February 27, 2017For Securities:CME

Summary

CME Group Inc. reported solid financial performance for the fiscal year ending December 30, 2016. The company experienced robust growth in total revenues, driven primarily by a significant increase in clearing and transaction fees, which rose by 9% year-over-year. This growth was fueled by a 12% increase in total contract volume, particularly in interest rate, energy, and metal products, reflecting heightened market volatility due to economic and political uncertainties. The company's strategic initiatives, including product innovation and global expansion, continue to yield positive results. CME Group maintained a strong operational efficiency, with operating income increasing by 11% and a healthy operating margin of 61%. The company also returned significant value to shareholders through dividends, with a notable increase in the quarterly dividend and a substantial annual variable dividend. Looking ahead, CME Group is well-positioned to navigate the evolving regulatory landscape and capitalize on opportunities arising from market dynamics.

Financial Highlights

46 data points
Beta

Revenue

$3.60B

Net Income

$1.53B

42.7% Net Margin

EPS (Diluted)

$4.53

Total Assets

$69.37B

Cash & Equivalents

$1.87B

Free Cash Flow

$1.64B

Financial Statements
Beta
Revenue$3.60B
Operating Expenses$1.39B
Operating Income$2.20B
Net Income$1.53B
EPS (Basic)$4.55
EPS (Diluted)$4.53
Shares Outstanding (Basic)337.50M
Shares Outstanding (Diluted)338.97M

Key Highlights

  • 1Total revenues increased by 8% to $3.595 billion in 2016, primarily driven by a 9% rise in clearing and transaction fees.
  • 2Total contract volume increased by 12% to 3,943.7 million round turn trades in 2016, with notable growth in interest rate, energy, and metal products.
  • 3Operating income grew by 11% to $2.203 billion, reflecting strong operational performance and efficiency.
  • 4Market data and information services revenue saw a modest 2% increase to $406.5 million.
  • 5The company returned $1.917 billion to shareholders through dividends in 2016, an increase from $1.343 billion in 2015.
  • 6Electronic trading continued to dominate, representing 88% of total contract volume, up from 87% in the prior year.
  • 7CME Group maintained a strong liquidity position with cash and cash equivalents totaling $1.869 billion at year-end 2016.

Frequently Asked Questions

CME Group's revenue growth in 2016 was primarily driven by an increase in clearing and transaction fees, which benefited from a 12% rise in total contract volume. This volume increase was influenced by market volatility stemming from global economic concerns, the Federal Reserve's interest rate policy, and political events such as the UK's EU referendum and the US presidential election. Key product lines showing significant volume growth included interest rates, energy, and metals.

CME Group returned significant value to shareholders in 2016 through dividends. The company paid regular quarterly dividends and also declared a substantial annual variable dividend of $3.25 per share, paid in January 2017. The dividend policy aims to return between 50% and 60% of the prior year's cash earnings to shareholders.

CME Group's strategy focuses on leveraging its benchmark products, enhancing customer relationships, expanding its customer base, and advancing its trading and clearing technologies. The company also aims to capitalize on opportunities presented by increased market awareness and acceptance of derivatives, technological advancements, and the growing need for counterparty risk mitigation and clearing services. Strategic initiatives include product innovation and global expansion.

CME Group identifies several key risks, including the impact of domestic and international market, economic, and political conditions on contract volumes. It also faces risks from operating in a heavily regulated environment, intense competition, the potential inability to retain or attract customers, and cybersecurity threats. Furthermore, the company's substantial fixed cost structure means that revenue declines could adversely affect profitability.