01—Abstract
Summary
Summary of the 10-Q filed November 2, 2018. Cited figures are marked; the original filing is the authoritative source.
CME Group Inc. reported solid financial performance for the nine months ended September 30, 2018, with total revenues increasing by 12% to $3.07 billiona and net income growing by 40% to $1.58 billion compared to the same period in 2017.
This growth was driven by a 12%b increase in clearing and transaction fees, largely due to higher contract volumes, particularly in interest rate, equity, and foreign exchange products, reflecting increased market volatility. The company also saw strong performance in market data and information services, with revenues up 10%. Operationally, expenses increased by 15% year-over-year, primarily due to foreign currency exchange rate fluctuations, increased professional fees related to the NEX acquisition and litigation, and impairment charges.
Despite these increased costs, the company maintained a strong operating margin of 63.7%c. CME Group's liquidity remains robust, with cash from operating activities increasing significantly. The company also successfully closed its acquisition of NEX Group plc on November 2, 2018, a strategic move expected to enhance its global derivatives marketplace offering.
02—Key points
Key Highlights
- Total revenues for the first nine months of 2018 rose 12% to $3.07 billion, compared to $2.74 billion in the prior year period.
- Net income increased by 40% to $1.58 billion for the first nine months of 2018, up from $1.12 billion in the same period of 2017.
- Clearing and transaction fees grew 12% to $2.63 billion for the nine months ended September 30, 2018, driven by a 14% increase in total contract volume.
- Market data and information services revenue increased by 10% to $319.4 million for the first nine months of 2018.
- Operating expenses increased 15% year-over-year, partly due to foreign currency fluctuations and professional fees related to the NEX acquisition and litigation.
- The company completed its acquisition of NEX Group plc on November 2, 2018, a significant strategic development.
- Cash flow from operating activities saw a substantial increase of 50% for the first nine months of 2018, indicating strong operational cash generation.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2018filed November 2, 2018Financial Statements
Q3 FY2018 against Q3 FY2017
| Line item | Q3 FY2018Q3 FY2017 | Change |
|---|---|---|
| Revenue | $904.20M$890.80M | +1.5% |
| Operating Expenses | $354.30M$323.20M | +9.6% |
| Operating Income | $549.90M$567.60M | −3.1% |
| Net Income | $411.80M$308.60M | +33.4% |
| EPS (Basic) | $1.21$0.91 | +33.0% |
| EPS (Diluted) | $1.21$0.91 | +33.0% |
| Shares Outstanding (Basic) | 339.59M338.77M | +0.2% |
| Shares Outstanding (Diluted) | 341.04M340.33M | +0.2% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth for CME Group in the first nine months of 2018?
Revenue growth was primarily driven by a 12% increase in clearing and transaction fees, fueled by a 14% rise in total contract volume. This increase in volume was particularly notable in interest rate, equity, and foreign exchange products, reflecting higher market volatility. Additionally, market data and information services revenue saw a 10% increase.
How did expenses change, and what were the key factors contributing to the increase?
Total operating expenses increased by 15% for the first nine months of 2018 compared to the prior year. Key factors contributing to this rise included unfavorable foreign currency exchange rate fluctuations, higher professional fees and outside services related to the NEX Group plc acquisition and ongoing litigation, and impairment charges on certain assets.
What is the significance of the NEX Group plc acquisition?
The acquisition of NEX Group plc, which closed on November 2, 2018, for approximately $5.6 billion, is a significant strategic move for CME Group. It is expected to enhance CME's global derivatives marketplace offering and expand its product and service capabilities.
How did the company's liquidity position change?
CME Group demonstrated strong liquidity, with cash flows from operating activities increasing by 50% to $1.93 billion for the first nine months of 2018. This indicates robust cash generation from its core operations. The company also has access to significant credit facilities to support its liquidity needs.
06—Continue