News Release

CME Group Inc. Reports Strong First-Quarter 2017 Financial Results

Thu Apr 27 2017

CHICAGO, April 27, 2017 – CME Group Inc. (NASDAQ: CME) today reported revenue of $929 million and operating income of $601 million for the first quarter of 2017.  Net income was $400 million and diluted earnings per share were $1.18.  On an adjusted basis, net income was a record $416 million and diluted earnings per share were a record $1.22.  Financial results presented on an adjusted basis for the first quarters of 2017 and 2016 exclude certain items, which are detailed in the reconciliation of non-GAAP results.1

“At a time of increased global uncertainty, our diverse products and product extensions provide customers with highly effective ways to manage risks across all major asset classes,” said CME Group Chairman and Chief Executive Officer Terry Duffy.  “This is reflected in our record first-quarter results, which included our largest quarterly average daily volume ever, with record volumes in interest rate futures and options, metals futures and equity options.  Our success is further evidenced by the record open interest of more than 123 million contracts we hit during the first quarter.  At the same time, we continue to focus on operational efficiency and expense discipline.  This gives us the opportunity to invest in our long-term growth initiatives while returning excess cash to our shareholders.”

First-quarter 2017 average daily volume was a record 17.1 million contracts, up 1 percent compared with first-quarter 2016.  Clearing and transaction fee revenue was $792 million, down 1 percent compared with first-quarter 2016.  First-quarter 2017 total average rate per contract was 73.1 cents, flat with fourth-quarter 2016.  Market data revenue was $97 million, down 5 percent compared with the first quarter last year.

As of March 31, 2017, the company had $1.4 billion of cash and marketable securities and $2.2 billion of long-term debt.  The company paid dividends during the first quarter of $1.3 billion, consisting of the annual variable dividend for 2016 of $1.1 billion and the regular first-quarter dividend of $223 million.  The company has returned more than $7.7 billion to shareholders in the form of dividends since the implementation of the variable dividend policy in early 2012.

1. A reconciliation of the non-GAAP financial results mentioned to the respective GAAP figures can be found within the Reconciliation of GAAP to non-GAAP Measures chart at the end of the financial statements and earnings presentation materials.

CME Group will hold a conference call to discuss first-quarter 2017 results at   8:30 a.m. Eastern Time today.  A live audio Webcast of the call will be available on the Investor Relations section of CME Group’s Web site at www.cmegroup.com.  An archived recording will be available for up to two months after the call.

As the world’s leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) is where the world comes to manage risk.  Through its exchanges, CME Group offers the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals.  CME Group provides electronic trading globally on its CME Globex platform.  The company also offers clearing and settlement services across asset classes for exchange-traded and over-the-counter derivatives through its clearinghouses CME Clearing and CME Clearing Europe.  CME Group’s products and services ensure that businesses around the world can effectively manage risk and achieve growth.

CME Group, the Globe logo, CME, Chicago Mercantile Exchange, Globex and E-mini are trademarks of Chicago Mercantile Exchange Inc.  CBOT, Chicago Board of Trade, KCBT and Kansas City Board of Trade are trademarks of Board of Trade of the City of Chicago, Inc.  NYMEX, New York Mercantile Exchange and ClearPort are trademarks of New York Mercantile Exchange, Inc.  COMEX is a trademark of Commodity Exchange, Inc.  Dow Jones, Dow Jones Industrial Average, S&P 500 and S&P are service and/or trademarks of Dow Jones Trademark Holdings LLC, Standard & Poor's Financial Services LLC and S&P/Dow Jones Indices LLC, as the case may be, and have been licensed for use by Chicago Mercantile Exchange Inc.  All other trademarks are the property of their respective owners.

Statements in this press release that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. We want to caution you not to place undue reliance on any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Among the factors that might affect our performance are increasing competition by foreign and domestic entities, including increased competition from new entrants into our markets and consolidation of existing entities; our ability to keep pace with rapid technological developments, including our ability to complete the development, implementation and maintenance of the enhanced functionality required by our customers while maintaining reliability and ensuring that such technology is not vulnerable to security risks; our ability to continue introducing competitive new products and services on a timely, cost-effective basis, including through our electronic trading capabilities, and our ability to maintain the competitiveness of our existing products and services, including our ability to provide effective services to the swaps market; our ability to adjust our fixed costs and expenses if our revenues decline; our ability to maintain existing customers, develop strategic relationships and attract new customers; our ability to expand and offer our products outside the United States; changes in regulations, including the impact of any changes in laws or government policy with respect to our industry, such as any changes to regulations and policies that require increased financial and operational resources from us or our customers; the costs associated with protecting our intellectual property rights and our ability to operate our business without violating the intellectual property rights of others; decreases in revenue from our market data as a result of decreased demand; changes in our rate per contract due to shifts in the mix of the products traded, the trading venue and the mix of customers (whether the customer receives member or non-member fees or participates in one of our various incentive programs) and the impact of our tiered pricing structure; the ability of our financial safeguards package to adequately protect us from the credit risks of clearing members; the ability of our compliance and risk management methods to effectively monitor and manage our risks, including our ability to prevent errors and misconduct and protect our infrastructure against security breaches and misappropriation of our intellectual property assets; changes in price levels and volatility in the derivatives markets and in underlying equity, foreign exchange, interest rate and commodities markets; economic, political and market conditions, including the volatility of the capital and credit markets and the impact of economic conditions on the trading activity of our current and potential customers; our ability to accommodate increases in contract volume and order transaction traffic and to implement enhancements without failure or degradation of the performance of our trading and clearing systems; our ability to execute our growth strategy and maintain our growth effectively; our ability to manage the risks and control the costs associated with our strategy for acquisitions, investments and alliances;  our ability to continue to generate funds and/or manage our indebtedness to allow us to continue to invest in our business; industry and customer consolidation; decreases in trading and clearing activity; the imposition of a transaction tax or user fee on futures and options on futures transactions and/or repeal of the 60/40 tax treatment of such transactions; and the unfavorable resolution of material legal proceedings.  For a detailed discussion of these and other factors that might affect our performance, see our filings with the Securities and Exchange Commission, including our most recent periodic reports filed on Form 10-K and Form 10-Q.

 

CME Group Inc. and Subsidiaries

Consolidated Balance Sheets

(in millions)

 

 

 

March 31, 2017

 

December 31, 2016

ASSETS

 

 

 

 

Current Assets:

 

 

 

 

Cash and cash equivalents

 

$

1,287.8

 

 

$

1,868.6

 

Marketable securities

 

87.1

 

 

83.3

 

Accounts receivable, net of allowance

 

426.6

 

 

364.4

 

Other current assets (includes $30.0 in restricted cash)

 

145.8

 

 

171.7

 

Performance bonds and guaranty fund contributions

 

44,421.2

 

 

37,543.5

 

Total current assets

 

46,368.5

 

 

40,031.5

 

Property, net of accumulated depreciation and amortization

 

411.6

 

 

425.2

 

Intangible assets—trading products

 

17,175.3

 

 

17,175.3

 

Intangible assets—other, net

 

2,417.8

 

 

2,441.8

 

Goodwill

 

7,569.0

 

 

7,569.0

 

Other assets (includes $62.4 and $61.7 in restricted cash)

 

1,533.8

 

 

1,726.6

 

Total Assets

 

$

75,476.0

 

 

$

69,369.4

 

LIABILITIES AND EQUITY

 

 

 

 

Current Liabilities:

 

 

 

 

Accounts payable

 

$

38.4

 

 

$

26.2

 

Other current liabilities

 

345.2

 

 

1,376.7

 

Performance bonds and guaranty fund contributions

 

44,421.2

 

 

37,542.7

 

Total current liabilities

 

44,804.8

 

 

38,945.6

 

Long-term debt

 

2,231.6

 

 

2,231.2

 

Deferred income tax liabilities, net

 

7,308.4

 

 

7,291.0

 

Other liabilities

 

577.0

 

 

560.9

 

Total Liabilities

 

54,921.8

 

 

49,028.7

 

Shareholders’ equity

 

20,554.2

 

 

20,340.7

 

Total Liabilities and Equity

 

$

75,476.0

 

 

$

69,369.4

 

 

CME Group Inc. and Subsidiaries

Consolidated Statements of Income

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

 

 

Quarter Ended

March 31,

 

 

2017

 

2016

Revenues

 

 

 

 

Clearing and transaction fees

 

$

792.0

 

 

$

796.1

 

Market data and information services

 

96.8

 

 

102.4

 

Access and communication fees

 

24.3

 

 

21.6

 

Other

 

16.2

 

 

14.1

 

Total Revenues

 

929.3

 

 

934.2

 

Expenses

 

 

 

 

Compensation and benefits

 

142.3

 

 

131.9

 

Communications

 

6.3

 

 

6.7

 

Technology support services

 

18.7

 

 

17.4

 

Professional fees and outside services

 

28.6

 

 

31.7

 

Amortization of purchased intangibles

 

24.0

 

 

24.0

 

Depreciation and amortization

 

29.4

 

 

33.9

 

Occupancy and building operations

 

20.1

 

 

21.3

 

Licensing and other fee agreements

 

33.8

 

 

39.0

 

Other

 

24.9

 

 

54.4

 

Total Expenses

 

328.1

 

 

360.3

 

Operating Income

 

601.2

 

 

573.9

 

Non-Operating Income (Expense)

 

 

 

 

Investment income

 

138.9

 

 

17.6

 

Interest and other borrowing costs

 

(29.8

)

 

(29.8

)

Equity in net earnings (losses) of unconsolidated subsidiaries

 

30.8

 

 

26.8

 

Other non-operating income (expense)

 

(34.1

)

 

(10.0

)

Total Non-Operating Income (Expense)

 

105.8

 

 

4.6

 

Income before Income Taxes

 

707.0

 

 

578.5

 

Income tax provision

 

307.2

 

 

210.7

 

Net Income

 

$

399.8

 

 

$

367.8

 

Earnings per Common Share:

 

 

 

 

Basic

 

$

1.18

 

 

$

1.09

 

Diluted

 

1.18

 

 

1.09

 

Weighted Average Number of Common Shares:

 

 

 

 

Basic

 

338,339

 

 

337,014

 

Diluted

 

339,946

 

 

338,549

 

 

CME Group Inc. and Subsidiaries

Quarterly Operating Statistics

 

 

 

1Q 2016

 

2Q 2016

 

3Q 2016

 

4Q 2016

 

1Q 2017

Trading Days

 

61

 

 

64

 

 

64

 

 

63

 

 

62

 

                               

Quarterly Average Daily Volume (ADV)

CME Group ADV (in thousands)

 

Product Line

 

1Q 2016

 

2Q 2016

 

3Q 2016

 

4Q 2016

 

1Q 2017

Interest rate

 

8,246

 

 

6,776

 

 

6,791

 

 

8,300

 

 

9,169

 

Equity

 

3,557

 

 

2,957

 

 

2,876

 

 

2,875

 

 

2,766

 

Foreign exchange

 

944

 

 

838

 

 

772

 

 

883

 

 

894

 

Energy

 

2,536

 

 

2,322

 

 

2,294

 

 

2,586

 

 

2,496

 

Agricultural commodity

 

1,206

 

 

1,722

 

 

1,156

 

 

1,193

 

 

1,261

 

Metal

 

454

 

 

468

 

 

431

 

 

488

 

 

512

 

Total

 

16,944

 

 

15,082

 

 

14,319

 

 

16,325

 

 

17,098

 

Venue

 

 

 

 

 

 

 

 

 

 

Electronic

 

14,713

 

 

13,355

 

 

12,672

 

 

14,375

 

 

14,947

 

Open outcry

 

1,423

 

 

1,075

 

 

982

 

 

1,130

 

 

1,362

 

Privately negotiated

 

807

 

 

651

 

 

665

 

 

820

 

 

789

 

Total

 

16,944

 

 

15,082

 

 

14,319

 

 

16,325

 

 

17,098

 

Average Rate Per Contract (RPC)

CME Group RPC

 

Product Line

 

1Q 2016

 

2Q 2016

 

3Q 2016

 

4Q 2016

 

1Q 2017

Interest rate

 

$

0.501

 

 

$

0.496

 

 

$

0.508

 

 

$

0.491

 

 

$

0.492

 

Equity

 

0.726

 

 

0.709

 

 

0.676

 

 

0.691

 

 

0.718

 

Foreign exchange

 

0.767

 

 

0.798

 

 

0.806

 

 

0.804

 

 

0.823

 

Energy

 

1.203

 

 

1.168

 

 

1.097

 

 

1.099

 

 

1.130

 

Agricultural commodity

 

1.321

 

 

1.291

 

 

1.335

 

 

1.336

 

 

1.334

 

Metal

 

1.597

 

 

1.562

 

 

1.542

 

 

1.486

 

 

1.496

 

Average RPC

 

$

0.756

 

 

$

0.782

 

 

$

0.750

 

 

$

0.731

 

 

$

0.731

 

 

CME Group Inc. and Subsidiaries

Reconciliation of GAAP to non-GAAP Measures

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

 

 

 

 

 

 

 

Quarter Ended

March 31,

 

 

2017

 

2016

Net Income

 

$

399.8

 

 

$

367.8

 

 

 

 

 

 

Restructuring and severance

 

1.8

 

 

 

 

 

 

 

 

Amortization of purchased intangibles

 

24.0

 

 

24.0

 

 

 

 

 

 

Loss on disposal of building assets

 

 

 

1.3

 

 

 

 

 

 

Loss and expenses related to sale-leaseback of data center

 

 

 

28.6

 

 

 

 

 

 

Foreign exchange transaction losses (gains)1

 

(2.5

)

 

3.9

 

 

 

 

 

 

(Gains) losses on sale of BM&FBOVESPA shares

 

(86.5

)

 

 

 

 

 

 

 

Income tax effect related to above2

 

(8.9

)

 

(20.5

)

 

 

 

 

 

Other income tax item3

 

87.8

 

 

 

 

 

 

 

 

Adjusted Net Income

 

$

415.5

 

 

$

405.1

 

 

 

 

 

 

GAAP Earnings per Common Share:

 

 

 

 

     Basic

 

$

1.18

 

 

$

1.09

 

     Diluted

 

1.18

 

 

1.09

 

 

 

 

 

 

Adjusted Earnings per Common Share:

 

 

 

 

     Basic

 

$

1.23

 

 

$

1.20

 

     Diluted

 

1.22

 

 

1.20

 

 

 

 

 

 

Weighted Average Number of Common Shares:

 

 

 

 

     Basic

 

338,339

 

 

337,014

 

     Diluted

 

339,946

 

 

338,549

 

 

 

 

 

 

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

2. Income tax effect related to all of the above includes all of the items above except for the tax impact related to the gain on sale of BM&FBOVESPA shares.

3. In conjunction with the final sale of BM&FBOVESPA shares, we reclassified income tax expense from accumulated other comprehensive income to the income tax provision.

 

 

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