Summary
CME Group Inc. reported strong revenue growth in the third quarter and first nine months of 2008, driven by increased trading volumes across its exchanges, notably due to the acquisition of NYMEX Holdings. Total revenues increased by 20% year-over-year for the quarter and 52% for the nine-month period. This growth was primarily in clearing and transaction fees, and quotation data fees, though processing services saw a decline. The company's expenses also increased, largely due to higher amortization of purchased intangibles, compensation, and depreciation, reflecting the impact of recent acquisitions. Net income for the quarter decreased compared to the prior year, primarily due to increased interest expenses from new debt used to finance the NYMEX merger and certain impairments. The company ended the period with a robust liquidity position, though it faces ongoing challenges from market volatility and credit market disruptions. The significant event during this period was the completion of the merger with NYMEX Holdings in August 2008, which substantially expanded CME Group's product offerings and market presence. This integration, along with the earlier acquisition of CBOT Holdings, has led to substantial increases in goodwill and intangible assets on the balance sheet. The company has taken on significant new debt to finance these transactions. Despite increased revenues, the company's net income was impacted by higher operating expenses, increased borrowing costs, and non-operating expenses such as impairments and equity in losses of unconsolidated subsidiaries. Investors should note the substantial increase in long-term debt and the ongoing integration efforts related to the NYMEX acquisition.
Financial Highlights
28 data points| Revenue | $680.90M |
| Operating Expenses | $260.20M |
| Operating Income | $420.70M |
| Net Income | $168.70M |
| EPS (Basic) | $0.56 |
| EPS (Diluted) | $0.56 |
| Shares Outstanding (Basic) | 299.35M |
| Shares Outstanding (Diluted) | 300.43M |
Key Highlights
- 1Total revenues increased by 20% for the quarter ended September 30, 2008, and 52% for the nine months ended September 30, 2008, compared to the same periods in 2007, largely driven by the inclusion of NYMEX Holdings' results and increased trading volumes.
- 2Clearing and transaction fees, the company's primary revenue driver, saw significant growth, up 17% for the quarter and 56% year-to-date.
- 3The acquisition of NYMEX Holdings, completed in August 2008, significantly increased the company's assets, including goodwill and intangible assets, and also contributed to a substantial rise in long-term debt.
- 4Operating expenses rose 18% for the quarter and 44% year-to-date, driven by increased compensation and benefits, amortization of purchased intangibles, and depreciation, reflecting the integration of recent acquisitions.
- 5Net income decreased to $168.7 million for the quarter, down from $201.6 million in the prior year, impacted by higher interest and other borrowing costs, and a $20.1 million equity in losses of unconsolidated subsidiaries.
- 6The company ended the period with $582.4 million in cash and cash equivalents, but also carried $2.4 billion in long-term debt, primarily incurred to finance the NYMEX merger.
- 7Market volatility, particularly due to the credit crisis, led to increased trading volumes in equity and commodity products but negatively impacted interest rate products and investment income.