10-QPeriod: Q1 FY2016

CME GROUP INC. Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 4, 2016For Securities:CME

Summary

CME Group Inc. reported a strong first quarter for 2016, with total revenues increasing by 11% year-over-year to $934.2 million. This growth was primarily driven by a 12% increase in clearing and transaction fees, largely due to a 13% rise in overall contract volume. Significant increases in equity and interest rate contract volume were observed, attributed to market volatility stemming from global economic concerns and Federal Reserve interest rate policy uncertainty. Net income rose by 11% to $367.8 million, with diluted earnings per share (EPS) also increasing by 11% to $0.98. The company maintained a healthy operating margin of 61.4%. Despite a notable expense related to a datacenter sale-leaseback transaction, operating expenses saw a controlled increase of 7%. The company also highlighted its strong liquidity position and compliance with regulatory capital requirements.

Financial Highlights

45 data points
Beta

Revenue

$934.20M

Net Income

$367.80M

39.4% Net Margin

EPS (Diluted)

$1.09

Total Assets

$68.77B

Cash & Equivalents

$1.15B

Free Cash Flow

$509.80M

Financial Statements
Beta
Revenue$934.20M
Operating Expenses$360.30M
Operating Income$573.90M
Net Income$367.80M
EPS (Basic)$1.09
EPS (Diluted)$1.09
Shares Outstanding (Basic)337.01M
Shares Outstanding (Diluted)338.55M

Key Highlights

  • 1Total revenues increased 11% to $934.2 million in Q1 2016, driven by higher clearing and transaction fees.
  • 2Clearing and transaction fees grew 12% to $796.1 million, supported by a 13% increase in total contract volume.
  • 3Equity and interest rate contract volumes saw substantial growth, reflecting increased market volatility.
  • 4Net income increased by 11% to $367.8 million, with diluted EPS rising to $1.09.
  • 5Operating margin improved to 61.4% from 60.2% in the prior year period.
  • 6A $28.6 million loss was recognized from a datacenter sale-leaseback transaction, impacting operating expenses.
  • 7The company reported strong operating cash flows, up 24% year-over-year.

Frequently Asked Questions

The primary driver of revenue growth was the increase in clearing and transaction fees, which rose by 12% to $796.1 million. This was fueled by a 13% increase in overall contract volume, particularly in equity and interest rate products, reflecting heightened market volatility.

In the first quarter of 2016, CME Group sold and leased back a datacenter. This transaction was accounted for under the financing method and resulted in a $28.6 million loss and expense, which included a write-down to fair value and transaction-related costs. This impacted operating expenses for the quarter.

CME Group expects market volatility to continue to influence trading volumes. The report attributes increased volume in equity and interest rate contracts to global market concerns, uncertainty around the Federal Reserve's interest rate policy, and the deceleration of the Chinese economy. Similarly, energy contract volume increased due to uncertainty in crude oil prices and oversupply.

The company reported a strong financial position with total assets of $68.8 billion and shareholders' equity of $20.8 billion as of March 31, 2016. Net cash provided by operating activities increased by 24% to $519.7 million, indicating robust cash generation. The company also has significant credit facilities available, totaling $2.3 billion under its senior revolving credit facility, providing ample liquidity.