CME Group Inc. Reports Fourth-Quarter and Full-Year 2018 Financial Results

PRNewswire 14-Feb-2019 7:00 AM

CHICAGO, Feb. 14, 2019 /PRNewswire/ -- CME Group Inc. (NASDAQ:CME) today reported financial results for the fourth quarter and full year of 2018.  Consolidated results include NEX Group plc (NEX) activity for November and December 2018.

The company reported revenue of $1.2 billion and operating income of $650 million for the fourth quarter of 2018.  Net income was $385.5 million and diluted earnings per share were $1.09.  On an adjusted basis, net income was $625 million and diluted earnings per share were $1.77.  Financial results presented on an adjusted basis for the fourth quarters of 2018 and 2017 exclude certain items, which are detailed in the reconciliation of non-GAAP results.1

Total revenue for full-year 2018 was $4.3 billion and operating income was $2.6 billion.  Net Income was $2.0 billion and diluted earnings per share were $5.71. On an adjusted basis, net income was $2.3 billion, and diluted earnings per share were $6.82.

"During the fourth quarter, elevated volatility and increased customer demand for our diverse risk management products resulted in strong trading volumes, exceeding 20 million contracts per day," said CME Group Chairman and Chief Executive Officer Terry Duffy. "We set annual average daily volume records in four of our six asset classes as well as in total options and demonstrated solid expense control during 2018. In November, we completed the NEX acquisition, which positions us to launch innovative new products to an expanding global customer base across futures, options, cash and OTC markets. Looking ahead to 2019, we're extremely focused on the continued integration of these two great companies, and expect to unlock additional value for our customers and shareholders."

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.

Fourth-quarter 2018 average daily volume (ADV) was 20.8 million contracts, up 31 percent compared with fourth-quarter 2017, and representing the second-highest quarterly ADV on record.  Non-U.S. ADV grew 22 percent to 4.8 million contracts during the quarter, driven by strong performance in Equity and Interest Rates products.  Clearing and transaction fees revenue for the fourth-quarter 2018 totaled just over $1.0 billion and the total average rate per contract was $0.697, down 7 percent compared with $0.753 in third-quarter 2018. This decline was driven primarily by product mix.  Market data revenue totaled $130 million for the fourth-quarter 2018.

As of December 31, 2018, the company had $1.5 billion in cash (including $100 million deposited with Fixed Income Clearing Corporation (FICC) and included in other current assets) and $4.4 billion in debt.  The company declared dividends during 2018 of $1.6 billion, including the annual variable dividend for 2018 of $624 million, which was paid in January 2019.  The company has returned more than $11.2 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 fourth-quarter 2018 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 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) 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)




December 31, 2018


December 31, 2017

ASSETS





Current Assets:





Cash and cash equivalents


$

1,374.5



$

1,903.6


Marketable securities


72.9



90.1


Accounts receivable, net of allowance


553.3



359.7


Other current assets (includes $1.5 and $0 in restricted cash)


430.5



367.8


Performance bonds and guaranty fund contributions


39,455.5



44,185.3


Total current assets


41,886.7



46,906.5


Property, net of accumulated depreciation and amortization


448.7



399.7


Intangible assets—trading products


17,175.3



17,175.3


Intangible assets—other, net


5,500.1



2,346.3


Goodwill


10,805.3



7,569.0


Other assets (includes $1.2 and $2.4 in restricted cash)


1,659.6



1,394.4


Total Assets


$

77,475.7



$

75,791.2


LIABILITIES AND EQUITY





Current Liabilities:





Accounts payable


$

116.0



$

31.3


Short-term debt


574.2




Other current liabilities


1,126.9



1,456.3


Performance bonds and guaranty fund contributions


39,455.5



44,185.3


Total current liabilities


41,272.6



45,672.9


Long-term debt


3,826.8



2,233.1


Deferred income tax liabilities, net


5,665.9



4,857.7


Other liabilities


745.1



615.7


Total Liabilities


51,510.4



53,379.4


CME Group Shareholders' Equity


25,918.5



22,411.8


Non-controlling interest


46.8




Total Equity


25,965.3



22,411.8


Total Liabilities and Equity


$

77,475.7



$

75,791.2


 

CME Group Inc. and Subsidiaries

Consolidated Statements of Income

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



Quarter Ended
December 31,


Year Ended
December 31,


2018


2017


2018


2017

Revenues








Clearing and transaction fees

$

1,034.8



$

758.4



$

3,667.0



$

3,098.6


Market data and information services

130.2



102.0



449.6



391.8


Other

71.6



39.6



192.8



154.3


Total Revenues

1,236.6



900.0



4,309.4



3,644.7


Expenses








Compensation and benefits

223.8



139.9



672.2



563.9


Technology

41.8



27.0



117.2



101.6


Professional fees and outside services

60.3



34.6



166.1



117.6


Amortization of purchased intangibles

59.0



23.7



130.0



95.5


Depreciation and amortization

32.9



27.9



118.7



113.0


Licensing and other fee agreements

47.8



38.1



170.6



146.3


Other

121.1



71.9



327.0



196.2


Total Expenses

586.7



363.1



1,701.8



1,334.1


Operating Income

649.9



536.9



2,607.6



2,310.6


Non-Operating Income (Expense)








Investment income

185.3



140.5



745.1



531.7


Interest and other borrowing costs

(49.5)



(29.1)



(157.7)



(117.0)


Equity in net earnings (losses) of unconsolidated subsidiaries

39.2



32.7



152.8



129.2


Other non-operating income (expense)

(154.4)



(106.3)



(570.0)



(328.2)


Total Non-Operating Income (Expense)

20.6



37.8



170.2



215.7


Income before Income Taxes

670.5



574.7



2,777.8



2,526.3


Income tax provision (benefit)

283.5



(2,364.5)



814.1



(1,537.1)


Net Income

$

387.0



$

2,939.2



$

1,963.7



$

4,063.4


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

(1.5)





(1.5)




Net Income Attributable to CME Group

385.5



2,939.2



1,962.2



4,063.4


Earnings per Common Share Attributable to CME Group:








Basic

$

1.10



$

8.67



$

5.73



$

12.00


Diluted

1.09



8.63



5.71



11.94


Weighted Average Number of Common Shares:








Basic

350,921



339,153



342,344



338,707


Diluted

352,132



340,490



343,737



340,226


 

CME Group Inc. and Subsidiaries

Quarterly Operating Statistics



4Q 2017


1Q 2018


2Q 2018


3Q 2018


4Q 2018

Trading Days

63



61



64



63



64




Quarterly Average Daily Volume (ADV)

CME Group ADV (in thousands)


Product Line

4Q 2017


1Q 2018


2Q 2018


3Q 2018


4Q 2018

Interest rates

7,970



11,948



9,200



7,798



10,919


Equity indexes

2,632



4,096



3,086



2,671



4,510


Foreign exchange

941



1,100



1,035



944



942


Energy

2,489



2,754



2,630



2,199



2,665


Agricultural commodities

1,278



1,593



1,734



1,348



1,248


Metals

616



713



674



623



547


Total

15,925



22,204



18,359



15,584



20,831


Venue















CME Globex

14,265



19,796



16,644



14,082



19,024


Open outcry

1,066



1,556



1,066



938



1,128


Privately negotiated

594



851



649



564



680


Total

15,925



22,204



18,359



15,584



20,831




Average Rate Per Contract (RPC)

CME Group RPC


Product Line

4Q 2017


1Q 2018


2Q 2018


3Q 2018


4Q 2018

Interest rates

$

0.467



$

0.464



$

0.491



$

0.493



$

0.475


Equity indexes

0.768



0.781



0.797



0.761



0.715


Foreign exchange

0.785



0.762



0.741



0.743



0.720


Energy

1.133



1.140



1.142



1.187



1.150


Agricultural commodities

1.251



1.246



1.274



1.258



1.261


Metals

1.315



1.367



1.403



1.379



1.428


Average RPC

$

0.736



$

0.706



$

0.757



$

0.753



$

0.697


 

CME Group Inc. and Subsidiaries

Reconciliation of GAAP to non-GAAP Measures

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










Quarter Ended
December 31,


Year Ended
December 31,


2018


2017


2018


2017

Net Income Attributable to CME Group

$

385.5



$

2,939.2



$

1,962.2



$

4,063.4










Restructuring and severance

2.5



2.9



4.4



6.8










Amortization of purchased intangibles

59.0



23.7



130.0



95.5










Litigation matters





10.3












Acquisition-related costs(1)

88.7





109.7












Foreign exchange transaction (gains) losses(2)

9.1



0.6



73.6



(9.4)










Acceleration of contractual commitments

(2.3)



8.3



(1.6)



8.3










Unrealized and realized (gains) losses on CME Ventures investments

(11.6)



0.5



(97.5)



0.5










Gains on sale of BM&FBOVESPA & Bolsa Mexicana shares



(0.3)





(88.8)










Intangible and fixed asset impairments

3.9





13.4












(Gain) loss on disposal of assets

(0.4)





1.1



0.6










Loss on derivatives

10.9





62.3












Debt costs related to acquisition

5.1





21.9












Income tax effect related to above

(26.2)



(17.7)



(58.8)



(43.1)










Other income tax items(3)

100.3



(2,574.2)



113.4



(2,410.2)










Adjusted Net Income Attributable to CME Group

$

624.5



$

383.0



$

2,344.4



$

1,623.6










GAAP Earnings per Common Share Attributable to CME Group:








     Basic

$

1.10



$

8.67



$

5.73



$

12.00


     Diluted

1.09



8.63



5.71



11.94










Adjusted Earnings per Common Share Attributable to CME Group:








     Basic

$

1.78



$

1.13



$

6.85



$

4.79


     Diluted

1.77



1.12



6.82



4.77










Weighted Average Number of Common Shares:








     Basic

350,921



339,153



342,344



338,707


     Diluted

352,132



340,490



343,737



340,226



1. Acquisition-related costs include professional fees, acceleration of stock-based compensation and transfer taxes related to the acquisition of NEX.

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. Other income tax items is primarily driven by the revaluation of our deferred tax liability related to the acquisition of NEX.

CME-G

Cision View original content:http://www.prnewswire.com/news-releases/cme-group-inc-reports-fourth-quarter-and-full-year-2018-financial-results-300795538.html

SOURCE CME Group