01—Abstract
Summary
Summary of the 10-Q filed August 5, 2021. Cited figures are marked; the original filing is the authoritative source.
CME Group Inc. reported stable total revenues for the quarter ended June 30, 2021, at $1.179 billiona, 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 billionb 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 millionc, 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.
02—Key points
Key Highlights
- Total 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.
- Clearing 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.
- Expenses were well-managed, decreasing by 7% for both the quarter and the six-month period, leading to improved operating margins.
- Net 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.
- Diluted 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.
- The company is proceeding with the combination of its post-trade services businesses with IHS Markit, classifying related net assets as held for sale.
- Despite 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.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2021filed August 5, 2021Financial Statements
Q2 FY2021 against Q2 FY2020
| Line item | Q2 FY2021Q2 FY2020 | Change |
|---|---|---|
| Revenue | $1.18B$1.18B | −0.3% |
| Operating Expenses | $504.50M$544.80M | −7.4% |
| Operating Income | $674.70M$637.50M | +5.8% |
| Net Income | $510.30M$503.30M | +1.4% |
| EPS (Basic) | $1.42$1.41 | +0.7% |
| EPS (Diluted) | $1.42$1.40 | +1.4% |
| Shares Outstanding (Basic) | 358.26M357.69M | +0.2% |
| Shares Outstanding (Diluted) | 358.89M358.46M | +0.1% |
05—Questions
Frequently Asked Questions
What is the primary driver behind the decrease in clearing and transaction fees?
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.
How is CME Group managing its expenses?
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.
What is the status of the joint venture with IHS Markit?
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.
How does the change in market volatility in 2021 compare to 2020, and how does it impact CME Group?
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.
06—Continue