10-QPeriod: Q2 FY2013

CME GROUP INC. Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 8, 2013For Securities:CME

Summary

CME Group Inc. reported solid financial results for the second quarter and first half of 2013, demonstrating revenue growth driven primarily by an increase in clearing and transaction fees. This surge in revenue is attributed to higher contract volumes, particularly in interest rate and equity products, influenced by market volatility stemming from anticipated changes in Federal Reserve monetary policy. Despite a decline in market data and information services revenue due to the prior year's deconsolidation of its index business and sale of a subsidiary, overall revenues increased year-over-year for the quarter. Expenses were well-managed, decreasing due to the prior year's divestitures and cost control measures, leading to a significant increase in net income attributable to CME Group and improved operating margins. The company's balance sheet reflects a strong increase in cash and cash equivalents and a substantial rise in cash performance bonds and guaranty fund contributions, indicating robust operational activity and financial health. Debt levels were managed effectively, with a decrease in long-term debt. CME Group's liquidity position remains strong, supported by significant operating cash flows and substantial credit facilities. The company reiterated its commitment to shareholder returns through regular dividend payments and maintained an investment-grade credit rating, underscoring its stable financial standing.

Financial Highlights

47 data points
Beta

Revenue

$816.10M

Net Income

$311.20M

38.1% Net Margin

EPS (Diluted)

$0.93

Total Assets

$46.88B

Cash & Equivalents

$1.97B

Free Cash Flow

$337.20M

Financial Statements
Beta
Revenue$816.10M
Operating Expenses$308.30M
Operating Income$507.80M
Net Income$311.20M
EPS (Basic)$0.94
EPS (Diluted)$0.93
Shares Outstanding (Basic)332.34M
Shares Outstanding (Diluted)334.07M

Key Highlights

  • 1Total revenues increased by 3% to $816.1 million in Q2 2013 compared to $795.9 million in Q2 2012, driven by an 8% increase in clearing and transaction fees to $692.5 million.
  • 2Net income attributable to CME Group surged by 27% to $311.2 million in Q2 2013 from $244.9 million in Q2 2012.
  • 3Diluted earnings per share (EPS) increased by 26% to $0.93 in Q2 2013 from $0.74 in Q2 2012.
  • 4Total expenses decreased by 6% to $308.3 million in Q2 2013, primarily due to cost savings from prior year's divestitures and operational efficiencies.
  • 5Operating margin improved to 62% in Q2 2013 from 59% in Q2 2012.
  • 6Cash flows from operating activities for the first six months of 2013 increased by 17% to $768.8 million.
  • 7The company's cash and cash equivalents increased to $1.97 billion as of June 30, 2013, up from $1.60 billion as of December 31, 2012.

Frequently Asked Questions

The increase in clearing and transaction fees was primarily driven by a 16% rise in total contract volume in the second quarter of 2013 compared to the same period in 2012. This increase was largely attributable to higher interest rate contract volume resulting from changing market expectations regarding the Federal Reserve's monetary policy and quantitative easing strategy, as well as increased volatility in foreign exchange markets like the Japanese yen and British pound.

Market data and information services revenue decreased by 28% in the second quarter of 2013 compared to the prior year. This decline was mainly due to the deconsolidation of CME Group's index business into the S&P/Dow Jones Indices LLC (S&P/DJI) joint venture and the prior sale of Credit Market Analysis Ltd. (CMA), both of which occurred in 2012.

Total expenses decreased by 6% in the second quarter of 2013 year-over-year. This reduction was largely a result of lower expenses related to the deconsolidation of the index business and the sale of CMA. Additionally, decreases in stock-based compensation, employee separation costs, and professional fees contributed to overall expense control.

CME Group maintains a strong liquidity position, with cash and cash equivalents totaling $1.97 billion as of June 30, 2013. The company has managed its debt effectively, reducing long-term debt. It also has access to significant credit facilities, including a $1.8 billion revolving senior credit facility and a $5.0 billion 364-day multi-currency line of credit for its clearing house, ensuring ample financial flexibility.