10-QPeriod: Q1 FY2013

CME GROUP INC. Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 8, 2013For Securities:CME

Summary

CME Group Inc. reported its first quarter 2013 results, showing a decrease in total revenues by 7% to $718.6 million compared to the prior year quarter, primarily driven by lower market data and information services revenue and a reduction in clearing and transaction fees due to a lower average rate per contract. Despite the revenue decline, operating expenses were also reduced by 3% to $313.1 million, largely due to the contribution of certain Dow Jones Index assets and the sale of Credit Market Analysis Ltd. Net income attributable to CME Group decreased by 12% to $235.8 million, leading to diluted earnings per share of $0.71, down from $0.80 in the first quarter of 2012. The company maintained a strong liquidity position with $1.84 billion in cash and cash equivalents. Management highlighted a stable operating margin of 56.4% and reiterated confidence in maintaining an investment grade rating.

Financial Highlights

47 data points
Beta

Revenue

$718.60M

Net Income

$235.80M

32.8% Net Margin

EPS (Diluted)

$0.71

Total Assets

$42.42B

Cash & Equivalents

$1.84B

Free Cash Flow

$375.80M

Financial Statements
Beta
Revenue$718.60M
Operating Expenses$313.10M
Operating Income$405.50M
Net Income$235.80M
EPS (Basic)$0.71
EPS (Diluted)$0.71
Shares Outstanding (Basic)331.95M
Shares Outstanding (Diluted)333.37M

Key Highlights

  • 1Total revenues declined 7% year-over-year to $718.6 million, primarily due to lower market data revenue and reduced clearing and transaction fees.
  • 2Operating expenses decreased by 3% to $313.1 million, aided by the contribution of Dow Jones Index assets and the sale of CMA.
  • 3Net income attributable to CME Group fell 12% to $235.8 million, resulting in diluted EPS of $0.71, down from $0.80 in the prior year.
  • 4Contract volume saw a slight decrease of 2%, while average daily volume increased by 2% due to fewer trading days in the current quarter.
  • 5Interest rate products volume was flat, with increases in long-term rates offset by declines in short-term rates.
  • 6Equity and foreign exchange product volumes showed increases, driven by improved macroeconomic conditions and currency volatility respectively.
  • 7The company maintained a solid liquidity position with $1.84 billion in cash and cash equivalents at the end of the quarter.

Frequently Asked Questions

The primary drivers of the revenue decline were a decrease in market data and information services revenue, largely due to the contribution of certain Dow Jones Index assets and the sale of Credit Market Analysis Ltd., and a decrease in clearing and transaction fees resulting from a lower average rate per contract.

Operating expenses were reduced by 3% compared to the prior year quarter. This reduction was primarily due to cost savings realized from the contribution of the Dow Jones Index asset group and the sale of Credit Market Analysis Ltd.

CME Group maintained a strong liquidity position with $1.84 billion in cash and cash equivalents at the end of the first quarter of 2013, an increase from $1.60 billion at the end of the prior year. The company also has significant borrowing capacity available.

Total contract volume decreased by 2% year-over-year, while average daily volume increased by 2% due to having two fewer trading days in the first quarter of 2013. The average rate per contract decreased by 3%, influenced by a shift in product mix towards lower-fee equity and foreign exchange products and increased incentives on energy contracts.