10-QPeriod: Q2 FY2021

CME GROUP INC. Quarterly Report for Q2 Ended Jun 30, 2021

Filed August 5, 2021For Securities:CME

Summary

CME Group Inc. reported stable total revenues for the quarter ended June 30, 2021, at $1.179 billion, virtually unchanged from the prior year's $1.182 billion. However, for the first six months of 2021, total revenues decreased by 10% to $2.433 billion compared to $2.704 billion in the same period of 2020. This revenue performance was primarily driven by a decline in clearing and transaction fees, which were down 1% for the quarter and 13% for the six-month period, largely due to lower contract volumes and a decrease in the average rate per contract. Despite the revenue dip in the year-to-date period, the company demonstrated strong cost management, with total expenses decreasing by 7% for both the quarter and the six-month period. This resulted in a higher operating margin of 57.2% for the quarter compared to 53.9% in the prior year. Net income attributable to CME Group saw a slight increase of 1% for the quarter to $510.3 million, but a notable decrease of 15% for the six months to $1.085 billion. Diluted earnings per share followed a similar trend, increasing to $1.42 for the quarter and decreasing to $3.02 for the six months.

Financial Highlights

45 data points
Beta

Revenue

$1.18B

Net Income

$510.30M

43.3% Net Margin

EPS (Diluted)

$1.42

Total Assets

$178.70B

Cash & Equivalents

$1.08B

Free Cash Flow

$460.10M

Financial Statements
Beta
Revenue$1.18B
Operating Expenses$504.50M
Operating Income$674.70M
Net Income$510.30M
EPS (Basic)$1.42
EPS (Diluted)$1.42
Shares Outstanding (Basic)358.26M
Shares Outstanding (Diluted)358.89M

Key Highlights

  • 1Total revenues remained stable year-over-year for the second quarter of 2021 at $1.179 billion, but declined 10% for the first six months to $2.433 billion.
  • 2Clearing and transaction fees, the company's primary revenue source, decreased by 1% for the quarter and 13% for the six-month period, reflecting lower contract volumes and average rates per contract.
  • 3Expenses were well-managed, decreasing by 7% for both the quarter and the six-month period, leading to improved operating margins.
  • 4Net income attributable to CME Group increased slightly by 1% for the quarter to $510.3 million but decreased by 15% for the six months to $1.085 billion.
  • 5Diluted earnings per share were $1.42 for the quarter, up from $1.40 in the prior year, but $3.02 for the six months, down from $3.54 in the prior year.
  • 6The company is proceeding with the combination of its post-trade services businesses with IHS Markit, classifying related net assets as held for sale.
  • 7Despite a decrease in overall contract volume, specific areas like interest rates (quarterly) and agriculture commodities (both periods) showed volume increases, driven by market volatility and specific commodity demand.

Frequently Asked Questions

The decrease in clearing and transaction fees is primarily attributed to a decline in overall contract volumes and a decrease in the average rate per contract. This was influenced by factors such as reduced volatility in certain markets (e.g., energy, equity indexes) compared to the prior year's pandemic-driven highs, and a shift in product mix towards lower-rate contracts like interest rate products.

CME Group has demonstrated effective expense management, with total expenses decreasing by 7% for both the second quarter and the first six months of 2021 compared to the prior year. Key contributors to this reduction include lower amortization of purchased intangibles (due to assets held for sale), decreased professional fees, and reduced licensing and other fee agreements.

CME Group has agreed to combine its post-trade services businesses with IHS Markit into a new joint venture. The net assets related to this venture have been classified as 'held for sale'. The transaction is expected to close in the third quarter of 2021, subject to regulatory approvals and other customary closing conditions.

Market volatility in 2021 has been mixed compared to 2020. While some sectors like energy and equity indexes saw decreased volatility and lower volumes, others like interest rates (due to inflation and potential rate hikes) and agriculture commodities (due to yield expectations) experienced increased volatility and volume. This mixed impact is reflected in the revenue and volume trends across different product lines.