10-QPeriod: Q3 FY2014

CME GROUP INC. Quarterly Report for Q3 Ended Sep 30, 2014

Filed November 3, 2014For Securities:CME

Summary

CME Group Inc. reported strong revenue growth for the third quarter of 2014, driven primarily by a significant increase in clearing and transaction fees, up 7% year-over-year. This surge was fueled by a 12% rise in total contract volume, particularly in interest rate and equity products, despite a slight decline in the average rate per contract. Market data and information services also saw robust growth of 12%. While operating expenses increased, the company maintained a healthy operating margin of 56.5%, reflecting effective cost management. Net income attributable to CME Group rose 23% to $290.0 million, with diluted earnings per share increasing to $0.86. The company's balance sheet remains robust, with substantial liquidity and manageable debt levels, reinforced by strong credit ratings. The nine-month performance also showed positive trends, with total revenues up 1% to $2.27 billion and net income up 5% to $820.6 million. While overall contract volume saw a modest increase, a decline in the average rate per contract was noted, impacting the total clearing and transaction fees year-over-year. Despite these nuances, CME Group demonstrates a solid financial position, supported by its diversified revenue streams and strategic initiatives, including the integration of new regulations and ongoing product development.

Financial Highlights

48 data points
Beta

Revenue

$762.40M

Net Income

$290.00M

38.0% Net Margin

EPS (Diluted)

$0.86

Total Assets

$63.97B

Cash & Equivalents

$1.09B

Free Cash Flow

$207.40M

Financial Statements
Beta
Revenue$762.40M
Operating Expenses$332.00M
Operating Income$430.40M
Net Income$290.00M
EPS (Basic)$0.87
EPS (Diluted)$0.86
Shares Outstanding (Basic)334.42M
Shares Outstanding (Diluted)336.17M

Key Highlights

  • 1Total revenues increased by 7% to $762.4 million in Q3 2014 compared to Q3 2013.
  • 2Clearing and transaction fees grew by 7% to $641.8 million in Q3 2014, driven by a 12% increase in total contract volume.
  • 3Interest rate product volume saw a significant increase of 23% in Q3 2014, indicating strong demand in this segment.
  • 4Net income attributable to CME Group increased by 23% to $290.0 million in Q3 2014.
  • 5Diluted earnings per share improved to $0.86 in Q3 2014, up from $0.71 in Q3 2013.
  • 6The company maintained strong operating margins, with an operating margin of 56.5% in Q3 2014.
  • 7Cash flow from operating activities decreased by 12% for the nine months ended September 30, 2014, compared to the prior year, primarily due to higher bonus payments and legal expenses.

Frequently Asked Questions

Revenue growth was primarily driven by a 7% increase in clearing and transaction fees, which was a result of a 12% increase in total contract volume. Market data and information services also contributed with a 12% increase.

Profitability showed significant improvement, with net income attributable to CME Group increasing by 23% to $290.0 million. Diluted earnings per share also rose to $0.86 from $0.71 in the prior year's quarter. The company maintained strong operating margins, indicating efficient operations.

CME Group maintains a robust liquidity position with $1.1 billion in cash and cash equivalents at the end of September 2014. The company has a manageable debt structure with strong investment-grade credit ratings. It also has significant borrowing capacity available through its revolving credit facilities.

The company is involved in several legal and regulatory matters, including patent infringement claims and a CFTC suit concerning disclosure of confidential customer information. While the company believes these matters are without merit and intends to defend itself vigorously, the outcomes are uncertain. The company has accrued $4.3 million for probable and estimable legal and regulatory matters at September 30, 2014.