CME Group Inc. Reports First-Quarter 2019 Financial Results

May 1, 2019

CME Group Inc. Reports First-Quarter 2019 Financial Results

CHICAGO, May 1, 2019 /PRNewswire/ -- CME Group Inc. (NASDAQ: CME) today reported financial results for the first quarter of 2019.

The company reported revenue of $1.2 billion and operating income of $631 million for the first quarter of 2019.  Net income was $497 million and diluted earnings per share were $1.39.  On an adjusted basis, net income was $579.2 million and diluted earnings per share were $1.62.  Financial results presented on an adjusted basis for the first quarter of 2019 and 2018 exclude certain items, which are detailed in the reconciliation of non-GAAP results.1

"Despite low levels of volatility in several product areas, we delivered our third-highest quarterly volume in our history during the first quarter, driven by continued product innovation and a growing proportion of our volume from customers outside the U.S.," said CME Group Chairman and Chief Executive Officer Terry Duffy.  "In addition, we continue to focus on the NEX integration and have been heavily engaged with clients about our expanded offerings.  Lastly, our expense control remained solid during the first quarter of 2019."

First-quarter 2019 average daily volume (ADV) was 18.6 million contracts, which was the third-highest quarter ever, down from a record first-quarter 2018.  Non-U.S. ADV also marked the third-highest quarterly ADV ever with 4.7 million contracts, down compared with a record first-quarter 2018.

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 first-quarter 2019 totaled just over $952.6 million and the total average rate per contract was $0.713, up 2 percent compared with $0.697 in fourth-quarter 2018. This was driven in part by increased activity in higher priced products.   Market data revenue totaled $130.1 million for first-quarter 2019.

As of March 31, 2019, the company had $1.1 billion in cash (including $100 million deposited with Fixed Income Clearing Corporation (FICC) and included in other current assets) and $4.3 billion in debt.  The company paid dividends during the first quarter of $892 million, including the annual variable dividend for 2018 of $624 million, which was paid in January 2019.  The company has returned approximately $11.5 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 first-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)

 
   

March 31, 2019

 

December 31, 2018

ASSETS

       

Current Assets:

       

Cash and cash equivalents

 

$

997.4

   

$

1,374.5

 

Marketable securities

 

82.4

   

72.9

 

Accounts receivable, net of allowance

 

559.5

   

553.3

 

Other current assets (includes $1.6 and $1.5 in restricted cash)

 

345.7

   

430.5

 

Performance bonds and guaranty fund contributions

 

33,620.2

   

39,455.5

 

Total current assets

 

35,605.2

   

41,886.7

 

Property, net of accumulated depreciation and amortization

 

467.7

   

448.7

 

Intangible assets—trading products

 

17,175.3

   

17,175.3

 

Intangible assets—other, net

 

5,380.6

   

5,500.1

 

Goodwill

 

10,850.3

   

10,805.3

 

Other assets (includes $1.1 and $1.2 in restricted cash)

 

2,135.4

   

1,659.6

 

Total Assets

 

$

71,614.5

   

$

77,475.7

 

LIABILITIES AND EQUITY

       

Current Liabilities:

       

Accounts payable

 

$

65.3

   

$

116.0

 

Short-term debt

 

   

574.2

 

Other current liabilities

 

622.8

   

1,126.9

 

Performance bonds and guaranty fund contributions

 

33,614.6

   

39,455.5

 

Total current liabilities

 

34,302.7

   

41,272.6

 

Long-term debt

 

4,292.0

   

3,826.8

 

Deferred income tax liabilities, net

 

5,662.7

   

5,665.9

 

Other liabilities

 

1,170.6

   

745.1

 

Total Liabilities

 

45,428.0

   

51,510.4

 

CME Group Shareholders' Equity

 

26,157.6

   

25,918.5

 

Non-controlling interests

 

28.9

   

46.8

 

Total Equity

 

26,186.5

   

25,965.3

 

Total Liabilities and Equity

 

$

71,614.5

   

$

77,475.7

 

 

CME Group Inc. and Subsidiaries

Consolidated Statements of Income

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

 
   

Quarter Ended
March 31,

   

2019

 

2018

Revenues

       

Clearing and transaction fees

 

$

952.6

   

$

973.6

 

Market data and information services

 

130.1

   

94.9

 

Other

 

96.9

   

40.5

 

Total Revenues

 

1,179.6

   

1,109.0

 

Expenses

       

Compensation and benefits

 

230.3

   

152.7

 

Technology

 

47.1

   

25.5

 

Professional fees and outside services

 

39.4

   

42.6

 

Amortization of purchased intangibles

 

80.7

   

23.7

 

Depreciation and amortization

 

32.9

   

28.1

 

Licensing and other fee agreements

 

40.5

   

49.5

 

Other

 

77.7

   

46.0

 

Total Expenses

 

548.6

   

368.1

 

Operating Income

 

631.0

   

740.9

 

Non-Operating Income (Expense)

       

Investment income

 

178.7

   

156.4

 

Interest and other borrowing costs

 

(48.1)

   

(30.1)

 

Equity in net earnings (losses) of unconsolidated subsidiaries

 

40.5

   

40.1

 

Other non-operating income (expense)

 

(161.9)

   

(118.6)

 

Total Non-Operating Income (Expense)

 

9.2

   

47.8

 

Income before Income Taxes

 

640.2

   

788.7

 

Income tax provision (benefit)

 

144.3

   

189.9

 

Net Income

 

495.9

   

598.8

 

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

 

1.0

   

 

Net Income Attributable to CME Group

 

$

496.9

   

$

598.8

 

Earnings per Common Share Attributable to CME Group:

       

Basic

 

$

1.39

   

$

1.76

 

Diluted

 

1.39

   

1.76

 

Weighted Average Number of Common Shares:

       

Basic

 

356,886

   

339,305

 

Diluted

 

358,047

   

340,747

 

 

CME Group Inc. and Subsidiaries

Quarterly Operating Statistics

 
   

1Q 2018

 

2Q 2018

 

3Q 2018

 

4Q 2018

 

1Q 2019

Trading Days

 

61

   

64

   

63

   

64

   

61

 
                               
 

Quarterly Average Daily Volume (ADV)(1)

CME Group ADV (in thousands)

 

Product Line

 

1Q 2018

 

2Q 2018

 

3Q 2018

 

4Q 2018

 

1Q 2019

Interest rates

 

11,948

   

9,200

   

7,798

   

10,919

   

10,313

 

Equity indexes

 

4,096

   

3,086

   

2,671

   

4,510

   

3,161

 

Foreign exchange

 

1,100

   

1,035

   

944

   

942

   

885

 

Energy

 

2,754

   

2,630

   

2,199

   

2,665

   

2,331

 

Agricultural commodities

 

1,593

   

1,734

   

1,348

   

1,248

   

1,381

 

Metals

 

713

   

674

   

623

   

547

   

561

 

Total

 

22,204

   

18,359

   

15,584

   

20,831

   

18,633

 

Venue

                             

CME Globex

 

19,796

   

16,644

   

14,082

   

19,024

   

16,576

 

Open outcry

 

1,556

   

1,066

   

938

   

1,128

   

1,284

 

Privately negotiated

 

851

   

649

   

564

   

680

   

773

 

Total

 

22,204

   

18,359

   

15,584

   

20,831

   

18,633

 
                     
 

1. ADV includes futures and options on futures only.

 
 

Average Rate Per Contract (RPC)

CME Group RPC

 
 

Product Line

 

1Q 2018

 

2Q 2018

 

3Q 2018

 

4Q 2018

 

1Q 2019

Interest rates

 

$

0.464

   

$

0.491

   

$

0.493

   

$

0.475

   

$

0.481

 

Equity indexes

 

0.781

   

0.797

   

0.761

   

0.715

   

0.757

 

Foreign exchange

 

0.762

   

0.741

   

0.743

   

0.720

   

0.763

 

Energy

 

1.140

   

1.142

   

1.187

   

1.150

   

1.159

 

Agricultural commodities

 

1.246

   

1.274

   

1.258

   

1.261

   

1.246

 

Metals

 

1.367

   

1.403

   

1.379

   

1.428

   

1.488

 

Average RPC

 

$

0.706

   

$

0.757

   

$

0.753

   

$

0.697

   

$

0.713

 

 

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,

   

2019

 

2018

Net Income Attributable to CME Group

 

$

496.9

   

$

598.8

 
         

Restructuring and severance

 

3.3

   

1.4

 
         

Amortization of purchased intangibles

 

80.7

   

23.7

 
         

Litigation matters

 

   

8.9

 
         

Acquisition-related costs(1)

 

7.9

   

9.5

 
         

Foreign exchange transaction (gains) losses(2)

 

7.6

   

1.6

 
         

Unrealized and realized (gains) losses on investments

 

3.4

   

(1.1)

 
         

Loss on real estate sublease and related costs

 

0.4

   

 
         

Loss on derivatives

 

14.4

   

 
         

Income tax effect related to above

 

(27.8)

   

(9.3)

 
         

Other income tax items

 

(7.6)

   

 
         

Adjusted Net Income Attributable to CME Group

 

$

579.2

   

$

633.5

 
         

GAAP Earnings per Common Share Attributable to CME Group:

       

     Basic

 

$

1.39

   

$

1.76

 

     Diluted

 

1.39

   

1.76

 
         

Adjusted Earnings per Common Share Attributable to CME Group:

       

     Basic

 

$

1.62

   

$

1.87

 

     Diluted

 

1.62

   

1.86

 
         

Weighted Average Number of Common Shares:

       

     Basic

 

356,886

   

339,305

 

     Diluted

 

358,047

   

340,747

 
         
 
 

1. Acquisition-related costs include professional fees and stock-based compensation.

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.

CME-G

 

Cision View original content:http://www.prnewswire.com/news-releases/cme-group-inc-reports-first-quarter-2019-financial-results-300841460.html

SOURCE CME Group

Media contact: Anita Liskey, 312.466.4613, news@cmegroup.com, www.cmegroup.mediaroom.com, Investor contact, John Peschier, 312.930.8491, Chris Grams, 312.930.3435

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