01—Abstract
Summary
Summary of the 10-Q filed May 8, 2019. Cited figures are marked; the original filing is the authoritative source.
CME Group Inc. reported solid financial results for the first quarter of 2019, with total revenues increasing by 6% year-over-year to $1.18 billiona.
This growth was primarily driven by a substantial 37% increase in Market Data and Information Services revenue and a 139% surge in "Other" revenue, largely attributable to the integration of the NEX Group acquisition completed in late 2018. Despite the revenue growth, Net Income attributable to CME Group declined by 17% to $496.9 millionb, resulting in a diluted EPS of $1.39, down from $1.76 in the prior year's quarter. This decline in profitability is mainly due to a significant 49% increase in total expenses, driven by higher compensation and benefits, technology costs, and amortization of purchased intangibles related to the NEX acquisition.
Operating income saw a decrease, impacted by these increased expenses. However, the company's balance sheet remains robust, with significant "Performance bonds and guaranty fund contributions" totaling $33.6 billionc.
Cash flow from operations, while lower than the prior year, remained strong, providing adequate liquidity. The company also highlighted its strong liquidity position and credit ratings, reaffirming its commitment to returning capital to shareholders through dividends.
02—Key points
Key Highlights
- Total revenues increased by 6% to $1.18 billion, driven by Market Data and Other revenue growth, boosted by the NEX acquisition.
- Net income attributable to CME Group decreased by 17% to $496.9 million, and diluted EPS fell to $1.39 from $1.76, primarily due to higher operating expenses.
- Total expenses rose significantly by 49% to $548.6 million, largely due to costs associated with the NEX acquisition (compensation, technology, amortization).
- Clearing and transaction fees saw a modest 2% decline to $952.6 million, attributed to a 16% decrease in total contract volume, partially offset by a slight increase in the average rate per contract.
- Market Data and Information Services revenue surged by 37% to $130.1 million, benefiting from the NEX integration and increased pricing.
- The company declared a regular quarterly dividend of $0.75 per share, indicating continued confidence in its financial health and commitment to shareholder returns.
- Liquidity remains strong, with $997.4 million in cash and cash equivalents and ample credit facilities available.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2019filed May 8, 2019Financial Statements
Q1 FY2019 against Q1 FY2018
| Line item | Q1 FY2019Q1 FY2018 | Change |
|---|---|---|
| Revenue | $1.18B$1.11B | +6.4% |
| Operating Expenses | $548.60M$368.10M | +49.0% |
| Operating Income | $631.00M$740.90M | −14.8% |
| Net Income | $496.90M$598.80M | −17.0% |
| EPS (Basic) | $1.39$1.76 | −21.0% |
| EPS (Diluted) | $1.39$1.76 | −21.0% |
| Shares Outstanding (Basic) | 356.89M339.31M | +5.2% |
| Shares Outstanding (Diluted) | 358.05M340.75M | +5.1% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in Q1 2019?
Revenue growth was primarily driven by the Market Data and Information Services segment, which saw a 37% increase, and the 'Other' revenue category, which grew by 139%. These increases are substantially attributed to the integration of NEX Group, acquired in late 2018, as well as increased pricing for market data services.
Why did net income decline despite revenue growth?
Net income attributable to CME Group decreased by 17% primarily due to a significant 49% increase in total operating expenses. This rise in expenses was largely driven by costs associated with the integration of the NEX acquisition, including higher compensation and benefits, technology expenditures, and amortization of acquired intangible assets.
How did contract volume and average rate per contract perform in Q1 2019?
Total contract volume for futures and options decreased by 16% year-over-year, influenced by a general decline in market volatility. However, the average rate per contract saw a slight increase of 1%, driven by lower tier-based incentives and a shift in product mix, which helped to partially offset the volume decline.
What is the company's liquidity position and how is it managing debt?
CME Group maintains a strong liquidity position with $997.4 million in cash and cash equivalents as of March 31, 2019. The company has significant borrowing capacity through its revolving credit facilities. In March 2019, it repaid two short-term debt instruments totaling approximately $574 million, demonstrating active debt management.
06—Continue