01—Abstract
Summary
Summary of the 10-Q filed November 3, 2021. Cited figures are marked; the original filing is the authoritative source.
CME Group Inc. reported solid financial results for the nine months ended September 30, 2021, with total revenues reaching $3.54 billiona, a decrease of 6% compared to the same period in 2020, primarily driven by lower clearing and transaction fees.
However, the company demonstrated strong operational efficiency, with total expenses decreasing by 8% year-over-year. Net income attributable to CME Group saw a significant increase of 20% to $2.01 billionb, bolstered by substantial non-operating income, including a notable gain from the deconsolidation of its optimization business into the OSTTRA joint venture. Diluted earnings per share also grew by 19% to $5.60.
The company's balance sheet remains robust, with total assets increasing significantly to $186.8 billionc, largely due to a substantial rise in performance bonds and guaranty fund contributions. This increase reflects the central role CME Group plays in managing financial market risks.
Despite increased debt, particularly short-term debt, the company's overall financial position appears stable, supported by strong cash flows from operations. Investors should note the strategic move into the OSTTRA joint venture, which is expected to contribute to future earnings through equity method accounting.
02—Key points
Key Highlights
- Net income attributable to CME Group increased by 20% to $2.01 billion for the first nine months of 2021, compared to $1.68 billion in the prior year period.
- Diluted earnings per share grew by 19% to $5.60 for the first nine months of 2021, up from $4.70 in the same period of 2020.
- Total revenues for the nine months ended September 30, 2021, were $3.54 billion, a decrease of 6% from $3.79 billion in the prior year, primarily due to lower clearing and transaction fees.
- Total expenses decreased by 8% to $1.53 billion for the first nine months of 2021, reflecting improved operational efficiency.
- A significant gain of $343.5 million was recognized from the deconsolidation of the optimization business into the OSTTRA joint venture, contributing to strong non-operating income.
- Interest rate contract volumes increased substantially in the third quarter of 2021, driven by higher market volatility.
- The company's balance sheet shows a large increase in 'Performance bonds and guaranty fund contributions' to $149.2 billion as of September 30, 2021, reflecting its role as a clearing house.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2021filed November 3, 2021Financial Statements
Q3 FY2021 against Q3 FY2020
| Line item | Q3 FY2021Q3 FY2020 | Change |
|---|---|---|
| Revenue | $1.11B$1.08B | +2.7% |
| Operating Expenses | $496.20M$555.70M | −10.7% |
| Operating Income | $613.70M$525.00M | +16.9% |
| Net Income | $926.50M$411.70M | +125.0% |
| EPS (Basic) | $2.59$1.15 | +125.2% |
| EPS (Diluted) | $2.58$1.15 | +124.3% |
| Shares Outstanding (Basic) | 358.36M357.79M | +0.2% |
| Shares Outstanding (Diluted) | 358.99M358.59M | +0.1% |
05—Questions
Frequently Asked Questions
What is the primary driver behind the decrease in total revenues for the nine months ended September 30, 2021, compared to the same period in 2020?
The primary driver for the 6% decrease in total revenues to $3.54 billion was a decline in clearing and transaction fees, which fell by 8% to $2.82 billion. This was partly offset by a 7% increase in market data and information services revenue.
How did the OSTTRA joint venture impact CME Group's financial results?
The formation of the OSTTRA joint venture, achieved by contributing CME Group's optimization business, resulted in a significant gain of $343.5 million recognized in other non-operating income during the third quarter of 2021. CME Group now accounts for its 50% equity interest in OSTTRA using the equity method of accounting.
What caused the increase in 'Performance bonds and guaranty fund contributions' on the balance sheet?
The substantial increase in 'Performance bonds and guaranty fund contributions' to $149.2 billion as of September 30, 2021, is primarily due to the increased value of collateral held to support the clearing house's operations. This reflects the growing volume and value of contracts cleared through CME Group's platforms and the associated risk management requirements.
What is the outlook for interest rate and equity index contract volumes?
Interest rate contract volumes saw a significant increase in the third quarter of 2021 due to heightened market volatility, particularly surrounding potential Federal Reserve interest rate policy changes. Equity index contract volumes decreased in the third quarter and first nine months of 2021 compared to 2020, largely due to subsiding market volatility following the significant swings seen in early 2020.
06—Continue