CME Group’s third quarter improves steadily with Revenue of $904 million


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Derivatives marketplace CME Group (NASDAQ:CME) has today released its results for the third quarter of 2018 with a revenue of $904 million and operating income of $550 million.

Net income was $412 million and diluted earnings per share were $1.21, up from $0.91 in third-quarter 2017. On an adjusted basis, net income was $495 million and diluted earnings per share were $1.45, up from $1.19 in third-quarter 2017.

Financial results presented on an adjusted basis for the third quarters of 2018 and 2017 exclude certain items, which are detailed in the reconciliation of non-GAAP results.

Terry Duffy
Terry Duffy, CME Group

The third quarter improved steadily from July to September, driven by strength in our interest rate, equities and metals product lines,” said CME Group Chairman and Chief Executive Officer Terry Duffy.

Our solid expense management contributed to adjusted diluted earnings per share growth of more than 20 percent in the third quarter. Open interest has continued to rise to more than 128 million contracts, which illustrates the growing need for risk management globally. In addition, we have had an exceptional start to the fourth quarter, with growth in all six product areas and total volume up more than 40 percent compared with the same period a year ago.

Third-quarter 2018 average daily volume was 15.6 million contracts, down 1 percent compared with third-quarter 2017. Clearing and transaction fee revenue was $753 million, flat compared with third-quarter 2017. Third-quarter 2018 total average rate per contract was $0.753, compared with $0.757 in second-quarter 2018. Market data revenue was $111 million, up 14 percent compared with the third quarter last year.

As of September 30, 2018, the company had $1.5 billion of cash and marketable securities, excluding $1.6 billion held in escrow related to the potential NEX Group plc acquisition, and $3.4 billion of long-term debt. The company paid dividends during the third quarter of $237.7 million. The company has returned more than $10.3 billion to shareholders in the form of dividends since implementing the variable dividend policy in early 2012.

CME Group Inc. and Subsidiaries

Consolidated Balance Sheets

(in millions)

September 30, 2018

December 31, 2017

ASSETS

Current Assets:

Cash and cash equivalents

$

1,406.3

$

1,903.6

Marketable securities

82.8

90.1

Accounts receivable, net of allowance

386.3

359.7

Other current assets (includes $1,622.1 and $0 in restricted cash)

1,795.5

367.8

Performance bonds and guaranty fund contributions

37,843.9

44,185.3

Total current assets

41,514.8

46,906.5

Property, net of accumulated depreciation and amortization

362.7

399.7

Intangible assets—trading products

17,175.3

17,175.3

Intangible assets—other, net

2,268.4

2,346.3

Goodwill

7,569.0

7,569.0

Other assets (includes $1.3 and $2.4 in restricted cash)

1,473.9

1,394.4

Total Assets

$

70,364.1

$

75,791.2

LIABILITIES AND EQUITY

Current Liabilities:

Accounts payable

$

53.9

$

31.3

Other current liabilities

256.3

1,456.3

Performance bonds and guaranty fund contributions

37,843.9

44,185.3

Total current liabilities

38,154.1

45,672.9

Long-term debt

3,419.6

2,233.1

Deferred income tax liabilities, net

4,882.7

4,857.7

Other liabilities

612.0

615.7

Total Liabilities

47,068.4

53,379.4

Shareholders’ Equity

23,295.7

22,411.8

Total Liabilities and Equity

$

70,364.1

$

75,791.2

 

CME Group Inc. and Subsidiaries

Consolidated Statements of Income

(dollars in millions, except per share amounts; shares in thousands)

Quarter Ended
September 30,

Nine Months Ended
September 30,

2018

2017

2018

2017

Revenues

Clearing and transaction fees

$

752.5

$

756.2

$

2,632.2

$

2,340.2

Market data and information services

110.7

96.9

319.4

289.8

Access and communication fees

26.2

25.7

78.4

74.9

Other

14.8

12.0

42.8

39.8

Total Revenues

904.2

890.8

3,072.8

2,744.7

Expenses

Compensation and benefits

144.9

141.7

448.4

424.0

Communications

6.5

6.1

18.3

18.4

Technology support services

18.2

19.3

57.1

56.2

Professional fees and outside services

31.3

25.8

105.8

83.0

Amortization of purchased intangibles

23.7

23.8

71.0

71.8

Depreciation and amortization

30.2

26.9

85.8

85.1

Occupancy and building operations

21.0

19.8

61.2

59.1

Licensing and other fee agreements

33.4

41.5

122.8

108.2

Other

45.1

18.3

144.7

65.2

Total Expenses

354.3

323.2

1,115.1

971.0

Operating Income

549.9

567.6

1,957.7

1,773.7

Non-Operating Income (Expense)

Investment income

161.5

139.9

559.8

391.2

Interest and other borrowing costs

(45.0)

(29.1)

(108.2)

(87.9)

Equity in net earnings of unconsolidated subsidiaries

37.1

33.9

113.6

96.5

Other non-operating income (expense)

(141.7)

(105.0)

(415.6)

(221.9)

Total Non-Operating Income (Expense)

11.9

39.7

149.6

177.9

Income before Income Taxes

561.8

607.3

2,107.3

1,951.6

Income tax provision

150.0

298.7

530.6

827.4

Net Income

$

411.8

$

308.6

$

1,576.7

$

1,124.2

Earnings per Common Share:

Basic

$

1.21

$

0.91

$

4.64

$

3.32

Diluted

1.21

0.91

4.62

3.31

Weighted Average Number of Common Shares:

Basic

339,586

338,771

339,453

338,557

Diluted

341,035

340,329

340,907

340,114

 

CME Group Inc. and Subsidiaries

Quarterly Operating Statistics

3Q 2017

4Q 2017

1Q 2018

2Q 2018

3Q 2018

Trading Days

63

63

61

64

63

Quarterly Average Daily Volume (ADV)

CME Group ADV (in thousands)

Product Line

3Q 2017

4Q 2017

1Q 2018

2Q 2018

3Q 2018

Interest rate

7,424

7,970

11,948

9,200

7,798

Equity

2,624

2,632

4,096

3,086

2,671

Foreign exchange

971

941

1,100

1,035

944

Energy

2,693

2,489

2,754

2,630

2,199

Agricultural commodity

1,381

1,278

1,593

1,734

1,348

Metal

611

616

713

674

623

Total

15,704

15,925

22,204

18,359

15,584

Venue

Electronic

14,264

14,265

19,796

16,644

14,082

Open outcry

889

1,066

1,556

1,066

938

Privately negotiated

551

594

851

649

564

Total

15,704

15,925

22,204

18,359

15,584

Average Rate Per Contract (RPC)

CME Group RPC

Product Line

3Q 2017

4Q 2017

1Q 2018

2Q 2018

3Q 2018

Interest rate

$

0.485

$

0.467

$

0.464

$

0.491

$

0.493

Equity

0.738

0.768

0.781

0.797

0.761

Foreign exchange

0.796

0.785

0.762

0.741

0.743

Energy

1.072

1.133

1.140

1.142

1.187

Agricultural commodity

1.251

1.251

1.246

1.274

1.258

Metal

1.376

1.315

1.367

1.403

1.379

Average RPC

$

0.749

$

0.736

$

0.706

$

0.757

$

0.753

 

CME Group Inc. and Subsidiaries

Reconciliation of GAAP to non-GAAP Measures

(dollars in millions, except per share amounts; shares in thousands)

Quarter Ended
September 30,

Nine Months Ended
September 30,

2018

2017

2018

2017

Net Income

$

411.8

$

308.6

$

1,576.7

$

1,124.2

Restructuring and severance

0.2

1.9

3.9

Amortization of purchased intangibles

23.7

23.8

71.0

71.8

Litigation matters

10.3

Acquisition-related costs(1)

6.7

21.0

Foreign exchange transaction (gains) losses(2)

15.6

(2.9)

64.5

(10.0)

Acceleration of contractual commitments

0.7

Unrealized and realized (gains) losses on CME Ventures investments

3.4

(85.9)

Gains on sale of BM&FBOVESPA & Bolsa Mexicana shares

(2.0)

(88.5)

Intangible and fixed asset impairments

9.5

9.5

Loss on disposal of assets

1.5

1.5

0.6

Loss on derivatives

14.5

51.4

Debt costs related to acquisition

13.3

16.8

Income tax effect related to above

(17.1)

(7.4)

(32.6)

(25.4)

Other income tax items

11.9

86.1

13.1

164.0

Adjusted Net Income

$

495.0

$

406.2

$

1,719.9

$

1,240.6

GAAP Earnings per Common Share:

     Basic

$

1.21

$

0.91

$

4.64

$

3.32

     Diluted

1.21

0.91

4.62

3.31

Adjusted Earnings per Common Share:

     Basic

$

1.46

$

1.20

$

5.07

$

3.66

     Diluted

1.45

1.19

5.05

3.65

Weighted Average Number of Common Shares:

     Basic

339,586

338,771

339,453

338,557

     Diluted

341,035

340,329

340,907

340,114

1. Acquisition-related costs include professional fees related to the proposed acquisition of NEX Group plc.

2. Results include foreign exchange transaction net gains and losses principally related to cash held in British pounds within entities whose functional currency is the U.S. dollar.

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CME Group's third quarter improves steadily with Revenue of $904 million

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