10-QPeriod: Q2 FY2017

CME GROUP INC. Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 2, 2017For Securities:CME

Summary

CME Group Inc. reported solid financial results for the second quarter and the first six months of 2017, demonstrating resilience and growth. Total revenues saw a modest increase, driven primarily by a 3% rise in clearing and transaction fees for the quarter and a 1% increase for the six-month period, indicating robust trading activity. While average rates per contract saw a slight decline, this was more than offset by a significant increase in contract volume, particularly in interest rate and energy products. The company also managed its expenses effectively, with total operating expenses decreasing by 7% and 8% for the respective periods, primarily due to lower professional fees, reduced rent, and favorable foreign currency exchange rate fluctuations. Net income experienced a substantial increase of 30% for the quarter and 19% for the six-month period, leading to a healthy rise in diluted earnings per share. This strong performance was further bolstered by a significant increase in non-operating income, largely due to higher investment income from reinvested collateral and a gain from the sale of BM&FBOVESPA shares. The company maintains a strong liquidity position with substantial cash flows from operations and significant credit facilities available, underscoring its financial stability.

Financial Highlights

45 data points
Beta

Revenue

$924.60M

Net Income

$415.80M

45.0% Net Margin

EPS (Diluted)

$1.22

Total Assets

$78.54B

Cash & Equivalents

$1.36B

Free Cash Flow

$246.40M

Financial Statements
Beta
Revenue$924.60M
Operating Expenses$319.40M
Operating Income$605.20M
Net Income$415.80M
EPS (Basic)$1.23
EPS (Diluted)$1.22
Shares Outstanding (Basic)338.56M
Shares Outstanding (Diluted)340.02M

Key Highlights

  • 1Revenue increased by 2% to $924.6 million in Q2 2017 and by 1% to $1,853.9 million in the first six months of 2017, driven by clearing and transaction fees.
  • 2Clearing and transaction fees grew 3% to $792.0 million in Q2 2017 and 1% to $1,584.0 million in the first six months of 2017, supported by a 7% and 5% increase in contract volume respectively.
  • 3Total operating expenses decreased by 7% to $319.0 million in Q2 2017 and by 8% to $647.1 million in the first six months of 2017, benefiting from lower professional fees and favorable foreign currency fluctuations.
  • 4Net income surged by 30% to $415.8 million in Q2 2017 and by 19% to $815.6 million in the first six months of 2017.
  • 5Diluted earnings per share increased by 28% to $1.22 in Q2 2017 and by 18% to $2.40 in the first six months of 2017.
  • 6Strong performance in interest rate (up 21% daily volume in Q2) and energy products (up 13% daily volume in Q2) contributed to overall volume growth.
  • 7Non-operating income saw a significant increase due to higher investment income and a gain from the sale of BM&FBOVESPA shares.

Frequently Asked Questions

The primary driver of revenue growth was the increase in clearing and transaction fees, which rose by 3% to $792.0 million in the second quarter of 2017. This growth was supported by a 7% increase in total contract volume, indicating higher trading activity across CME Group's platforms.

CME Group effectively managed its expenses, with total operating expenses decreasing by 7% to $319.0 million in Q2 2017 compared to the prior year. Key contributing factors to this decrease included lower professional fees and outside services, reduced occupancy and building operations costs, and favorable foreign currency exchange rate fluctuations.

The company saw strong growth in interest rate products (21% increase in average daily volume for Q2 2017) and energy products (13% increase in average daily volume for Q2 2017), driven by market volatility and supply shifts. Equity and agricultural commodity volumes experienced declines, attributed to lower market volatility in those sectors.

CME Group maintains a strong liquidity position. Net cash provided by operating activities increased by 9% in the first six months of 2017. The company also has significant credit facilities available, including a $2.3 billion multi-currency revolving senior credit facility and a $7.0 billion 364-day multi-currency revolving secured credit facility, demonstrating robust financial flexibility.