10-QPeriod: Q2 FY2015

CME GROUP INC. Quarterly Report for Q2 Ended Jun 30, 2015

Filed August 5, 2015For Securities:CME

Summary

CME Group Inc. reported solid financial results for the six months ended June 30, 2015, demonstrating revenue growth driven primarily by increased clearing and transaction fees, alongside a strong performance in market data and information services. The company saw a significant increase in total revenues, up 10% year-over-year to $1.66 billion, and a corresponding 12% rise in net income attributable to CME Group to $595.4 million. This growth was fueled by a 9% increase in total contract volume, with notable strength in foreign exchange, energy, and agricultural commodity products, reflecting higher market volatility in these sectors. While operating expenses saw a modest increase, the company maintained a strong operating margin of 60.3%. CME Group also actively managed its debt, issuing new notes and repurchasing existing ones, resulting in a lower weighted average borrowing cost. The company maintained robust liquidity and a strong balance sheet, with a significant portion of its assets held in performance bonds and guaranty fund contributions. Looking ahead, CME Group remains focused on navigating market dynamics, technological advancements, and regulatory environments while continuing to deliver value to its shareholders.

Financial Highlights

46 data points
Beta

Revenue

$820.00M

Net Income

$265.00M

32.3% Net Margin

EPS (Diluted)

$0.78

Total Assets

$73.66B

Cash & Equivalents

$1.15B

Free Cash Flow

$229.50M

Financial Statements
Beta
Revenue$820.00M
Operating Expenses$324.90M
Operating Income$495.10M
Net Income$265.00M
EPS (Basic)$0.79
EPS (Diluted)$0.78
Shares Outstanding (Basic)336.04M
Shares Outstanding (Diluted)337.80M

Key Highlights

  • 1Total revenues increased by 10% to $1.66 billion for the first six months of 2015 compared to the same period in 2014.
  • 2Net income attributable to CME Group rose by 12% to $595.4 million for the first six months of 2015.
  • 3Total contract volume increased by 9% to 1,768.5 million for the first six months of 2015, driven by higher volatility in FX, energy, and agricultural markets.
  • 4Clearing and transaction fees, the largest revenue segment, grew by 9% to $1.35 billion for the first six months of 2015.
  • 5Market data and information services revenue increased by 12% to $200.8 million for the first six months of 2015.
  • 6The company successfully managed its debt, issuing $750 million in new notes and reducing its weighted average borrowing cost.
  • 7Operating expenses increased by 3% to $660.3 million, largely due to specific one-time items such as real estate taxes and fees, but the company maintained a healthy operating margin of 60.3%.

Frequently Asked Questions

The increase in revenue was primarily driven by a 9% rise in total contract volume, leading to a 9% increase in clearing and transaction fees, which benefited from higher volatility in foreign exchange, energy, and agricultural commodity markets. Additionally, market data and information services revenue grew by 12% due to reduced fee waivers for existing customers.

CME Group issued $750 million in new fixed rate notes due March 2025 and repurchased $612.5 million in older notes. These actions, combined with favorable interest rate environments, led to a decrease in the weighted average borrowing cost from 4.27% to 3.90% for the first six months of 2015.

While total expenses increased by 3% to $660.3 million, this was partly due to non-recurring items like additional real estate taxes and fees related to the NYMEX building transfer, and stock-based compensation. Despite these increases, CME Group maintained a strong operating margin of 60.3%, indicating effective cost management relative to revenue growth.

CME Group maintained a strong liquidity position with $1.15 billion in cash and cash equivalents as of June 30, 2015. The company has access to a $2.3 billion revolving senior credit facility and a $7.0 billion 364-day revolving secured credit facility for its clearing houses, with no borrowings outstanding under either facility at period-end. The company also reported compliance with all regulatory capital requirements for derivatives clearing organizations and designated contract markets.