News Release

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

Tue Aug 01 2017

CHICAGO, Aug. 1, 2017 /PRNewswire/ -- CME Group Inc. (NASDAQ: CME) today reported revenue of $925 million and operating income of $606 million for the second quarter of 2017.  Net income was $416 million and diluted earnings per share were $1.22.  On an adjusted basis, net income was a record $419 million and diluted earnings per share were a record $1.23.  Financial results presented on an adjusted basis for the second quarters of 2017 and 2016 exclude certain items, which are detailed in the reconciliation of non-GAAP results.1

"We drove strong growth in key product areas, with average daily volume up nine percent for the second quarter," said CME Group Chairman and Chief Executive Officer Terry Duffy.  "We delivered double-digit increases in our interest rate and energy product lines, and, for the third quarter in a row, we had record volume in metals.  Globally, volumes from outside the United States grew 16 percent, with record quarterly volume from both Europe and Asia.  In addition, our focus on expense discipline resulted in peak levels of adjusted net income and earnings per share for the quarter."          

Second-quarter 2017 average daily volume was 16.5 million contracts, up 9 percent compared with second-quarter 2016.  Clearing and transaction fee revenue was $792 million, up 3 percent compared with second-quarter 2016.  Second-quarter 2017 total average rate per contract was 74.9 cents, up 2 percent from first-quarter 2017, driven primarily by a sequential product mix shift with an increased proportion of the volume from commodity contracts, which capture higher fees.  Market data revenue was $96 million, down 7 percent compared with the second quarter last year, but relatively in line with the first quarter of this year.

As of June 30, 2017, the company had $1.4 billion of cash and marketable securities and $2.2 billion of long-term debt.  The company paid the regular second-quarter dividend of $223 million in June, and has returned approximately $8.0 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 second-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)

 
   

June 30, 2017

 

December 31, 2016

ASSETS

       

Current Assets:

       

Cash and cash equivalents

 

$

1,362.3

   

$

1,868.6

 

Marketable securities

 

84.3

   

83.3

 

Accounts receivable, net of allowance

 

416.4

   

364.4

 

Other current assets (includes $30.0 in restricted cash)

 

228.9

   

171.7

 

Performance bonds and guaranty fund contributions

 

47,405.0

   

37,543.5

 

Total current assets

 

49,496.9

   

40,031.5

 

Property, net of accumulated depreciation and amortization

 

399.5

   

425.2

 

Intangible assets—trading products

 

17,175.3

   

17,175.3

 

Intangible assets—other, net

 

2,393.8

   

2,441.8

 

Goodwill

 

7,569.0

   

7,569.0

 

Other assets (includes $22.1 and $61.7 in restricted cash)

 

1,509.3

   

1,726.6

 

Total Assets

 

$

78,543.8

   

$

69,369.4

 

LIABILITIES AND EQUITY

       

Current Liabilities:

       

Accounts payable

 

$

25.5

   

$

26.2

 

Other current liabilities

 

239.1

   

1,376.7

 

Performance bonds and guaranty fund contributions

 

47,405.0

   

37,542.7

 

Total current liabilities

 

47,669.6

   

38,945.6

 

Long-term debt

 

2,232.1

   

2,231.2

 

Deferred income tax liabilities, net

 

7,318.8

   

7,291.0

 

Other liabilities

 

546.5

   

560.9

 

Total Liabilities

 

57,767.0

   

49,028.7

 

Shareholders' equity

 

20,776.8

   

20,340.7

 

Total Liabilities and Equity

 

$

78,543.8

   

$

69,369.4

 

 

CME Group Inc. and Subsidiaries

Consolidated Statements of Income

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

 
   

Quarter Ended

June 30,

 

Six Months Ended

June 30,

   

2017

 

2016

 

2017

 

2016

Revenues

               

Clearing and transaction fees

 

$

792.0

   

$

767.6

   

$

1,584.0

   

$

1,563.7

 

Market data and information services

 

96.1

   

102.9

   

192.9

   

205.3

 

Access and communication fees

 

24.9

   

22.3

   

49.2

   

43.9

 

Other

 

11.6

   

13.6

   

27.8

   

27.7

 

Total Revenues

 

924.6

   

906.4

   

1,853.9

   

1,840.6

 

Expenses

               

Compensation and benefits

 

139.3

   

131.7

   

281.6

   

263.6

 

Communications

 

6.0

   

6.3

   

12.3

   

13.0

 

Technology support services

 

18.2

   

17.7

   

36.9

   

35.1

 

Professional fees and outside services

 

28.6

   

39.0

   

57.2

   

70.7

 

Amortization of purchased intangibles

 

24.0

   

24.0

   

48.0

   

48.0

 

Depreciation and amortization

 

28.8

   

30.4

   

58.2

   

64.3

 

Occupancy and building operations

 

19.2

   

24.4

   

39.3

   

45.7

 

Licensing and other fee agreements

 

32.9

   

32.8

   

66.7

   

71.8

 

Other

 

22.0

   

36.8

   

46.9

   

91.2

 

Total Expenses

 

319.0

   

343.1

   

647.1

   

703.4

 

Operating Income

 

605.6

   

563.3

   

1,206.8

   

1,137.2

 

Non-Operating Income (Expense)

               

Investment income

 

112.4

   

17.2

   

251.3

   

34.8

 

Interest and other borrowing costs

 

(29.0)

   

(31.0)

   

(58.8)

   

(60.8)

 

Equity in net earnings (losses) of unconsolidated subsidiaries

 

31.8

   

27.0

   

62.6

   

53.8

 

Other non-operating income (expense)

 

(83.5)

   

(10.4)

   

(117.6)

   

(20.4)

 

Total Non-Operating Income (Expense)

 

31.7

   

2.8

   

137.5

   

7.4

 
                         

Income before Income Taxes

 

637.3

   

566.1

   

1,344.3

   

1,144.6

 

Income tax provision

 

221.5

   

246.0

   

528.7

   

456.7

 

Net Income

 

$

415.8

   

$

320.1

   

$

815.6

   

$

687.9

 
                 

Earnings per Common Share:

               

Basic

 

$

1.23

   

$

0.95

   

$

2.41

   

$

2.04

 

Diluted

 

1.22

   

0.95

   

2.40

   

2.03

 

Weighted Average Number of Common Shares:

               

Basic

 

338,556

   

337,289

   

338,448

   

337,152

 

Diluted

 

340,020

   

338,706

   

339,974

   

338,599

 

 

CME Group Inc. and Subsidiaries

Quarterly Operating Statistics

 
   

2Q 2016

 

3Q 2016

 

4Q 2016

 

1Q 2017

 

2Q 2017

Trading Days

 

64

 

64

 

63

 

62

 

63

                               

 

Quarterly Average Daily Volume (ADV)

CME Group ADV (in thousands)

 

Product Line

 

2Q 2016

 

3Q 2016

 

4Q 2016

 

1Q 2017

 

2Q 2017

Interest rate

 

6,776

   

6,791

   

8,300

   

9,169

   

8,210

 

Equity

 

2,957

   

2,876

   

2,875

   

2,766

   

2,707

 

Foreign exchange

 

838

   

772

   

883

   

894

   

879

 

Energy

 

2,322

   

2,294

   

2,586

   

2,496

   

2,632

 

Agricultural commodity

 

1,722

   

1,156

   

1,193

   

1,261

   

1,491

 

Metal

 

468

   

431

   

488

   

512

   

533

 

Total

 

15,082

   

14,319

   

16,325

   

17,098

   

16,453

 

Venue

                   

Electronic

 

13,355

   

12,672

   

14,375

   

14,947

   

14,582

 

Open outcry

 

1,075

   

982

   

1,130

   

1,362

   

1,115

 

Privately negotiated

 

651

   

665

   

820

   

789

   

756

 

Total

 

15,082

   

14,319

   

16,325

   

17,098

   

16,453

 

 

Average Rate Per Contract (RPC)

CME Group RPC

 

Product Line

 

2Q 2016

 

3Q 2016

 

4Q 2016

 

1Q 2017

 

2Q 2017

Interest rate

 

$

0.496

   

$

0.508

   

$

0.491

   

$

0.492

   

$

0.491

 

Equity

 

0.709

   

0.676

   

0.691

   

0.718

   

0.731

 

Foreign exchange

 

0.798

   

0.806

   

0.804

   

0.823

   

0.807

 

Energy

 

1.168

   

1.097

   

1.099

   

1.130

   

1.096

 

Agricultural commodity

 

1.291

   

1.335

   

1.336

   

1.334

   

1.300

 

Metal

 

1.562

   

1.542

   

1.486

   

1.496

   

1.449

 

Average RPC

 

$

0.782

   

$

0.750

   

$

0.731

   

$

0.731

   

$

0.749

 

 

CME Group Inc. and Subsidiaries

Reconciliation of GAAP to non-GAAP Measures

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

   

Quarter Ended

June 30,

 

Six Months Ended

June 30,

   

2017

 

2016

 

2017

 

2016

Net Income

 

$

415.8

   

$

320.1

   

$

815.6

   

$

687.9

 

Restructuring and severance

 

2.1

   

   

3.9

   

 

Amortization of purchased intangibles

 

24.0

   

24.0

   

48.0

   

48.0

 

Loss on disposal of assets

 

0.6

   

4.0

   

0.6

   

5.3

 

Loss and expenses related to sale-leaseback of data center

 

   

   

   

28.6

 

Foreign exchange transaction losses (gains)1

 

(4.6)

   

11.6

   

(7.1)

   

15.5

 

Net (gains) losses on CME Venture investments

 

   

3.8

   

   

3.8

 

(Gains) losses on sale of BM&FBOVESPA shares

 

   

   

(86.5)

   

 

Income tax effect related to above2

 

(9.1)

   

(13.7)

   

(18.0)

   

(34.2)

 

Other income tax item3

 

(9.9)

   

37.5

   

77.9

   

37.5

 

Adjusted Net Income

 

$

418.9

   

$

387.3

   

$

834.4

   

$

792.4

 

GAAP Earnings per Common Share:

               

     Basic

 

$

1.23

   

$

0.95

   

$

2.41

   

$

2.04

 

     Diluted

 

1.22

   

0.95

   

2.40

   

2.03

 

Adjusted Earnings per Common Share:

               

     Basic

 

$

1.24

   

$

1.15

   

$

2.47

   

$

2.35

 

     Diluted

 

1.23

   

1.14

   

2.45

   

2.34

 

Weighted Average Number of Common Shares:

               

     Basic

 

338,556

   

337,289

   

338,448

   

337,152

 

     Diluted

 

340,020

   

338,706

   

339,974

   

338,599

 

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 the second quarter of 2017, we recognized the favorable settlements of federal and state examinations offset by tax charges related to the closure of the U.K. Exchange and Clearinghouse.

CME-G

SOURCE CME Group

Media Contacts, Anita Liskey, 312.466.4613, OR William Parke, 312.930.3467, news@cmegroup.com, www.cmegroup.mediaroom.com, OR Investor Contact, John Peschier, 312.930.8491

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