10-QPeriod: Q3 FY2015

CME GROUP INC. Quarterly Report for Q3 Ended Sep 30, 2015

Filed November 6, 2015For Securities:CME

Summary

CME Group Inc. reported a strong third quarter and first nine months of 2015, demonstrating robust revenue growth driven primarily by clearing and transaction fees, and market data services. Net income attributable to CME Group increased by a significant 24% for the quarter and 16% for the nine-month period compared to the prior year. This performance was fueled by a 12% increase in total revenues for the quarter and 11% for the nine months, reflecting higher contract volumes across various asset classes, notably equity, foreign exchange, agricultural, and energy products, which benefited from increased market volatility. Despite some revenue streams showing declines, such as interest rate products due to shifting market expectations on interest rates, the overall operational performance was positive. Expenses saw a modest increase of 1% for the quarter and 2% for the nine months, with notable fluctuations attributed to reorganization costs, licensing agreements, and compensation. The company's liquidity remains strong, with substantial cash and cash equivalents and significant available credit facilities. CME Group continues to manage its debt effectively, with a decrease in average borrowing costs. Overall, the filing indicates a company leveraging market volatility for growth in its core businesses while managing expenses and maintaining a healthy financial position. Investors can find reassurance in the sustained revenue growth, improved profitability, and solid liquidity, though attention to specific product line performance and ongoing operational expenses is warranted.

Financial Highlights

46 data points
Beta

Revenue

$850.30M

Net Income

$359.90M

42.3% Net Margin

EPS (Diluted)

$1.06

Total Assets

$80.95B

Cash & Equivalents

$1.43B

Free Cash Flow

$433.90M

Financial Statements
Beta
Revenue$850.30M
Operating Expenses$333.90M
Operating Income$516.40M
Net Income$359.90M
EPS (Basic)$1.07
EPS (Diluted)$1.06
Shares Outstanding (Basic)336.32M
Shares Outstanding (Diluted)338.14M

Key Highlights

  • 1Total revenues increased by 12% to $850.3 million for the quarter ended September 30, 2015, and by 11% to $2,513.0 million for the nine months ended September 30, 2015, compared to the prior year periods.
  • 2Net income attributable to CME Group surged by 24% to $359.9 million for the quarter and grew 16% to $955.3 million for the nine months, demonstrating strong profitability.
  • 3Clearing and transaction fees, the company's largest revenue source, increased by 11% and 10% for the quarter and nine months, respectively, driven by an 8% increase in total contract volume.
  • 4Market data and information services revenue grew by 13% for both the quarter and the nine-month period, primarily due to the reduction of fee waivers for existing customers.
  • 5Contract volume saw a significant increase, particularly in equity (27% quarterly, 6% nine-month), foreign exchange (7% quarterly, 20% nine-month), agricultural (20% quarterly, 17% nine-month), and energy (26% quarterly, 24% nine-month) products, reflecting heightened market volatility.
  • 6Operating expenses increased modestly by 1% for the quarter and 2% for the nine months, with fluctuations driven by specific items like reorganization costs and licensing agreements.
  • 7The company maintained strong liquidity, with cash and cash equivalents of $1.4 billion and significant undrawn credit facilities.

Frequently Asked Questions

Revenue growth was primarily driven by increases in clearing and transaction fees, which rose 11% for the quarter and 10% for the nine months due to higher contract volumes. Market data and information services revenue also saw a substantial increase of 13% for both periods, attributed to the reduction of fee waivers for existing customers.

Contract volumes increased significantly in equity (27% quarterly increase), foreign exchange (20% nine-month increase), agricultural (17% nine-month increase), and energy (24% nine-month increase) products, reflecting increased market volatility. However, interest rate product volumes saw a decline, particularly for longer-dated contracts, as market participants adjusted expectations for U.S. interest rate changes.

CME Group maintained a strong financial position with $1.4 billion in cash and cash equivalents. The company also has substantial borrowing capacity through its revolving credit facilities, totaling $2.3 billion for general corporate purposes and an additional $7.0 billion for CME Clearing. Debt costs were managed effectively, with weighted average borrowing costs decreasing due to debt refinancing.

The company is involved in ongoing legal proceedings, including a patent infringement case with Fifth Market, Inc. and a suit filed by the CFTC against NYMEX alleging disclosure of confidential customer information. While management believes it has strong defenses and that the outcomes will not materially impact financial position or results, these matters involve uncertainty and potential financial exposure.