News Release

CME Group Inc. Reports Third-Quarter 2019 Financial Results

Wed Oct 30 2019

CHICAGO, Oct. 30, 2019 /PRNewswire/ -- CME Group Inc. (NASDAQ: CME) today reported financial results for the third quarter of 2019.

The company reported revenue of $1.3 billion and operating income of $685 million for the third quarter of 2019.  Net income was $636 million and diluted earnings per share were $1.78.  On an adjusted basis, net income was $679 million and diluted earnings per share were $1.90.  Financial results presented on an adjusted basis for the third quarter of 2019 and 2018 exclude certain items, which are detailed in the reconciliation of non-GAAP results.1

"Clients continued to turn to CME Group markets to manage their risk during this period of increased volatility and geopolitical uncertainty," said CME Group Chairman and Chief Executive Officer Terry Duffy.  "Our third-quarter average daily volume surpassed 20 million contracts per day, driven by strong, double-digit growth in interest rates, equity index and metals products, as well as robust trading volumes outside of the U.S.  Likewise, our options products and newer, innovative contracts, like SOFR and Micro E-mini Equity futures, contributed to substantial volume growth during the quarter."

Third-quarter 2019 average daily volume (ADV) grew 30% from third-quarter 2018 to 20.2 million contracts per day.  CME Group's ADV transacted outside the U.S. reached 5.3 million contracts during the quarter, up 40% compared with third-quarter 2018, including 34% growth in Europe, 61% growth in Asia and 87% growth in greater Latin America.

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.

Clearing and transaction fees revenue for third-quarter 2019 totaled $1.0 billion and the total average rate per contract was $0.693, in line with second-quarter 2019.  Market data revenue totaled $130 million for third-quarter 2019.

As of September 30, 2019, the company had $1.3 billion in cash (including $100 million deposited with Fixed Income Clearing Corporation (FICC) and included in other current assets) and $3.9 billion in debt.  The company paid dividends during the third quarter of $268 million.  The company has returned over $12 billion to shareholders in the form of dividends since the implementation of the variable dividend policy in early 2012.

CME Group will hold a Q&A conference call to discuss third-quarter 2019 results at 8:30 a.m. Eastern Time today.  A live audio webcast of the Q&A call will be available on the Investor Relations section of CME Group's website 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) enables clients to trade futures, options, cash and OTC markets, optimize portfolios, and analyze data - empowering market participants worldwide to efficiently manage risk and capture opportunities. CME Group exchanges offer the widest range of global benchmark products across all major asset classes based on interest ratesequity indexesforeign exchangeenergyagricultural products and metals.  The company offers futures and options on futures trading through the CME Globex® platform, fixed income trading via BrokerTec and foreign exchange trading on the EBS platform.  In addition, it operates one of the world's leading central counterparty clearing providers, CME Clearing.  With a range of pre- and post-trade products and services underpinning the entire lifecycle of a trade, CME Group also offers optimization and reconciliation services through TriOptima, and trade processing services through Traiana.

CME Group, the Globe logo, CME, Chicago Mercantile Exchange, Globex, and, E-mini are trademarks of Chicago Mercantile Exchange Inc.  CBOT and Chicago 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. BrokerTec, EBS, TriOptima, and Traiana are trademarks of BrokerTec Europe LTD, EBS Group LTD, TriOptima AB, and Traiana, Inc., respectively.  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 globally offer our products and services; changes in regulations, including the impact of any changes in laws or government policy with respect to our products or services or 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 or changes to regulations in various jurisdictions; 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 credit and liquidity risk management practices to adequately protect us from the credit risks of clearing members and other counterparties, and to satisfy the margin and liquidity requirements associated with the BrokerTec matched principal business; 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; volatility in commodity, equity and fixed income prices, and price volatility of financial benchmarks and instruments such as interest rates, credit spreads, equity indices, fixed income instruments and foreign exchange rates; 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, control the costs and achieve the synergies associated with our strategy for acquisitions, investments and alliances, including those associated with the acquisition of NEX; 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; our ability to maintain our reputation; 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)




September 30, 2019


December 31, 2018

ASSETS





Current Assets:





Cash and cash equivalents


$

1,210.1



$

1,374.5


Marketable securities


80.1



72.9


Accounts receivable, net of allowance


545.7



553.3


Other current assets (includes $5.1 and $1.5 in restricted cash)


695.1



430.5


Performance bonds and guaranty fund contributions


41,161.3



39,455.5


Total current assets


43,692.3



41,886.7


Property, net of accumulated depreciation and amortization


517.3



448.7


Intangible assets—trading products


17,175.3



17,175.3


Intangible assets—other, net


5,161.2



5,500.1


Goodwill


10,774.4



10,805.3


Other assets (includes $0.9 and $1.2 in restricted cash)


2,097.1



1,659.6


Total Assets


$

79,417.6



$

77,475.7


LIABILITIES AND EQUITY





Current Liabilities:





Accounts payable


$

61.5



$

116.0


Short-term debt




574.2


Other current liabilities


691.6



1,126.9


Performance bonds and guaranty fund contributions


41,160.4



39,455.5


Total current liabilities


41,913.5



41,272.6


Long-term debt


3,873.3



3,826.8


Deferred income tax liabilities, net


5,614.4



5,665.9


Other liabilities


1,203.1



745.1


Total Liabilities


52,604.3



51,510.4


CME Group Shareholders' Equity


26,783.2



25,918.5


Non-controlling interests


30.1



46.8


Total Equity


26,813.3



25,965.3


Total Liabilities and Equity


$

79,417.6



$

77,475.7


 

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,



2019


2018


2019


2018

Revenues









Clearing and transaction fees


$

1,040.7



$

752.5



$

3,045.1



$

2,632.2


Market data and information services


129.8



110.7



388.2



319.4


Other


106.8



41.0



296.3



121.2


Total Revenues


1,277.3



904.2



3,729.6



3,072.8


Expenses









Compensation and benefits


223.5



144.9



681.1



448.4


Technology


52.7



24.7



148.4



75.4


Professional fees and outside services


43.2



31.3



124.3



105.8


Amortization of purchased intangibles


79.8



23.7



236.6



71.0


Depreciation and amortization


41.4



30.2



120.6



85.8


Licensing and other fee agreements


45.6



33.4



130.9



122.8


Other


105.9



66.1



272.9



205.9


Total Expenses


592.1



354.3



1,714.8



1,115.1


Operating Income


685.2



549.9



2,014.8



1,957.7


Non-Operating Income (Expense)









Investment income


172.3



161.5



490.3



559.8


Interest and other borrowing costs


(42.8)



(45.0)



(136.0)



(108.2)


Equity in net earnings (losses) of unconsolidated subsidiaries


48.0



37.1



132.3



113.6


Other non-operating income (expense)


(139.5)



(141.7)



(435.9)



(415.6)


Total Non-Operating Income (Expense)


38.0



11.9



50.7



149.6


Income before Income Taxes


723.2



561.8



2,065.5



2,107.3


Income tax provision (benefit)


86.9



150.0



418.7



530.6


Net Income


636.3



411.8



1,646.8



1,576.7


Less: net (income) loss attributable to non-controlling interests






0.2




Net Income Attributable to CME Group


$

636.3



$

411.8



$

1,647.0



$

1,576.7


Earnings per Common Share Attributable to CME Group:









Basic


$

1.78



$

1.21



$

4.61



$

4.64


Diluted


1.78



1.21



4.60



4.62


Weighted Average Number of Common Shares:









Basic


357,211



339,586



357,054



339,453


Diluted


358,369



341,035



358,201



340,907


 

CME Group Inc. and Subsidiaries

Quarterly Operating Statistics




3Q 2018


4Q 2018


1Q 2019


2Q 2019


3Q 2019

Trading Days


63


64


61


63


64

 

Quarterly Average Daily Volume (ADV)(1)

CME Group ADV (in thousands)


Product Line


3Q 2018


4Q 2018


1Q 2019


2Q 2019


3Q 2019

Interest rates


7,798



10,919



10,313



11,593



10,868


Equity indexes


2,671



4,510



3,161



3,480



3,931


Foreign exchange


944



942



885



874



850


Energy


2,199



2,665



2,331



2,498



2,456


Agricultural commodities


1,348



1,248



1,381



1,839



1,320


Metals


623



547



561



633



821


Total


15,584



20,831



18,633



20,918



20,247


Venue











CME Globex


14,082



19,024



16,576



18,505



18,282


Open outcry


938



1,128



1,284



1,501



1,177


Privately negotiated


564



680



773



912



788


Total


15,584



20,831



18,633



20,918



20,247


















1. ADV includes futures and options on futures only.

 

Average Rate Per Contract (RPC)

CME Group RPC


Product Line


3Q 2018


4Q 2018


1Q 2019


2Q 2019


3Q 2019

Interest rates


$

0.493



$

0.475



$

0.481



$

0.476



$

0.500


Equity indexes


0.761



0.715



0.757



0.676



0.612


Foreign exchange


0.743



0.720



0.763



0.713



0.720


Energy


1.187



1.150



1.159



1.139



1.137


Agricultural commodities


1.258



1.261



1.246



1.222



1.234


Metals


1.379



1.428



1.488



1.455



1.414


Average RPC


$

0.753



$

0.697



$

0.713



$

0.693



$

0.693


 

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,



2019


2018


2019


2018

Net Income Attributable to CME Group


$

636.3



$

411.8



$

1,647.0



$

1,576.7











Restructuring and severance


4.1



0.2



14.4



1.9











Amortization of purchased intangibles


79.8



23.7



236.6



71.0











Litigation matters








10.3











Acquisition-related costs(1)


8.2



6.7



22.7



21.0











Foreign exchange transaction (gains) losses(2)


(0.7)



15.6



1.7



64.5











Acceleration of contractual commitments


(1.3)





(1.3)



0.7











Unrealized and realized (gains) losses on investments


(6.6)



3.4



20.1



(85.9)











Loss on real estate sublease and related costs






5.4













Loss on derivatives


1.2



14.5



17.9



51.4











Realized and unrealized (gains) losses on assets(3)


46.6



11.0



78.8



11.0











Debt costs related to acquisition




13.3





16.8











Income tax effect related to above


(36.0)



(17.1)



(93.3)



(32.6)











Other income tax items(4)


(52.4)



11.9



(60.0)



13.1











Adjusted Net Income Attributable to CME Group


$

679.2



$

495.0



$

1,890.0



$

1,719.9











GAAP Earnings per Common Share Attributable to CME Group:









     Basic


$

1.78



$

1.21



$

4.61



$

4.64


     Diluted


1.78



1.21



4.60



4.62











Adjusted Earnings per Common Share Attributable to CME Group:









     Basic


$

1.90



$

1.46



$

5.29



$

5.07


     Diluted


1.90



1.45



5.28



5.05











Weighted Average Number of Common Shares:









     Basic


357,211



339,586



357,054



339,453


     Diluted


358,369



341,035



358,201



340,907











1. Acquisition-related costs primarily include professional fees related to the NEX transaction.

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.

3. Results include net gains and losses on intangible assets, fixed assets and assets held for sale.

4. Income tax benefit primarily from the deduction for income derived from servicing foreign customers.

CME-G

SOURCE CME Group

Media: Anita Liskey, 312.466.4613; or Chris Grams, 312.930.3435, news@cmegroup.com, www.cmegroup.mediaroom.com; or Investors: John Peschier, 312.930.8491

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