CME Group Inc. (NASDAQ: CME) today reported financial results for the second quarter of 2020.
The company reported revenue of $1.2 billion and operating income of $638 million for the second quarter of 2020. Net income was $503 million and diluted earnings per share were $1.40. On an adjusted basis, net income was $583 million and diluted earnings per share were $1.63. Financial results presented on an adjusted basis for the second quarter of 2020 and 2019 exclude certain items, which are detailed in the reconciliation of non-GAAP results.1
"Despite the difficult circumstances the coronavirus pandemic has caused around the world, our markets have continued to help clients manage their risk and navigate uncertainty," said CME Group Chairman and Chief Executive Officer Terry Duffy. "I am extremely proud of the way our employees have ensured the resiliency of our systems and effective operations of our markets while working from home. During this time, we have continued to deliver innovative new products, including the reintroduction of our 3-Year Treasury Note futures earlier this month, as well as new options on our highly successful Micro E-mini Equity futures that will begin trading in August. We also remain focused on the increased value we will provide to market participants through the migration of our BrokerTec business to CME Globex in Q4. As we look ahead, we remain committed to promoting the safety of our employees while continuing to facilitate the risk transfer and price discovery needed to help business and economies everywhere recover from this crisis."
Second-quarter 2020 ADV was 17.6 million contracts, including non-U.S. ADV of 4.9 million contracts.
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 second-quarter 2020 totaled $940.2 million. The total average rate per contract was $0.731. Market data revenue totaled $134.7 million for second-quarter 2020.
As of June 30, 2020, the company had approximately $1.5 billion in cash (including $125 million deposited with Fixed Income Clearing Corporation (FICC) and included in other current assets) and $3.4 billion of debt. The company paid dividends during the second quarter of $304 million. The company has returned approximately $13.8 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 Second-quarter 2020 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.
CME Group Inc. and Subsidiaries |
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Consolidated Balance Sheets |
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(in millions) |
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June 30, 2020 |
December 31, 2019 |
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ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ |
1,405.4 |
$ |
1,551.4 |
||||
Marketable securities |
88.1 |
83.2 |
||||||
Accounts receivable, net of allowance |
532.1 |
491.8 |
||||||
Other current assets (includes $4.4 and $4.3 in restricted cash) |
319.2 |
364.4 |
||||||
Performance bonds and guaranty fund contributions |
79,441.4 |
37,077.0 |
||||||
Total current assets |
81,786.2 |
39,567.8 |
||||||
Property, net of accumulated depreciation and amortization |
538.6 |
544.0 |
||||||
Intangible assets—trading products |
17,175.3 |
17,175.3 |
||||||
Intangible assets—other, net |
4,931.7 |
5,117.7 |
||||||
Goodwill |
10,742.5 |
10,742.5 |
||||||
Other assets (includes $0.7 and $0.9 in restricted cash) |
2,040.5 |
2,068.0 |
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Total Assets |
$ |
117,214.8 |
$ |
75,215.3 |
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LIABILITIES AND EQUITY |
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Current Liabilities: |
||||||||
Accounts payable |
$ |
88.0 |
$ |
61.9 |
||||
Other current liabilities |
672.5 |
1,384.8 |
||||||
Performance bonds and guaranty fund contributions |
79,440.9 |
37,075.8 |
||||||
Total current liabilities |
80,201.4 |
38,522.5 |
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Long-term debt |
3,440.9 |
3,743.2 |
||||||
Deferred income tax liabilities, net |
5,607.3 |
5,635.2 |
||||||
Other liabilities |
1,126.3 |
1,155.1 |
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Total Liabilities |
90,375.9 |
49,056.0 |
||||||
CME Group Shareholders' Equity |
26,807.9 |
26,128.9 |
||||||
Non-controlling interests |
31.0 |
30.4 |
||||||
Total Equity |
26,838.9 |
26,159.3 |
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Total Liabilities and Equity |
$ |
117,214.8 |
$ |
75,215.3 |
CME Group Inc. and Subsidiaries |
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Consolidated Statements of Income |
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(dollars in millions, except per share amounts; shares in thousands) |
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Quarter Ended |
Six Month Ended, |
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2020 |
2019 |
2020 |
2019 |
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Revenues |
||||||||||||||||
Clearing and transaction fees |
$ |
940.2 |
$ |
1,051.8 |
$ |
2,219.0 |
$ |
2,004.4 |
||||||||
Market data and information services |
134.7 |
128.3 |
266.2 |
258.4 |
||||||||||||
Other |
107.4 |
92.6 |
219.2 |
189.5 |
||||||||||||
Total Revenues |
1,182.3 |
1,272.7 |
2,704.4 |
2,452.3 |
||||||||||||
Expenses |
||||||||||||||||
Compensation and benefits |
217.0 |
227.3 |
424.5 |
457.6 |
||||||||||||
Technology |
49.1 |
48.6 |
96.8 |
95.7 |
||||||||||||
Professional fees and outside services |
51.2 |
41.7 |
92.9 |
81.1 |
||||||||||||
Amortization of purchased intangibles |
76.6 |
76.1 |
153.9 |
156.8 |
||||||||||||
Depreciation and amortization |
36.7 |
46.3 |
72.0 |
79.2 |
||||||||||||
Licensing and other fee agreements |
55.4 |
44.8 |
129.3 |
85.3 |
||||||||||||
Other |
58.8 |
89.3 |
137.6 |
167.0 |
||||||||||||
Total Expenses |
544.8 |
574.1 |
1,107.0 |
1,122.7 |
||||||||||||
Operating Income |
637.5 |
698.6 |
1,597.4 |
1,329.6 |
||||||||||||
Non-Operating Income (Expense) |
||||||||||||||||
Investment income |
32.1 |
139.3 |
128.0 |
318.0 |
||||||||||||
Interest and other borrowing costs |
(41.9) |
(45.1) |
(82.8) |
(93.2) |
||||||||||||
Equity in net earnings (losses) of unconsolidated subsidiaries |
48.8 |
43.8 |
100.0 |
84.3 |
||||||||||||
Other non-operating income (expense) |
(15.2) |
(134.5) |
(92.0) |
(296.4) |
||||||||||||
Total Non-Operating Income (Expense) |
23.8 |
3.5 |
53.2 |
12.7 |
||||||||||||
Income before Income Taxes |
661.3 |
702.1 |
1,650.6 |
1,342.3 |
||||||||||||
Income tax provision |
158.0 |
187.5 |
380.5 |
331.8 |
||||||||||||
Net Income |
503.3 |
514.6 |
1,270.1 |
1,010.5 |
||||||||||||
Less: net (income) loss attributable to non-controlling interests |
— |
(0.8) |
(0.6) |
0.2 |
||||||||||||
Net Income Attributable to CME Group |
$ |
503.3 |
$ |
513.8 |
$ |
1,269.5 |
$ |
1,010.7 |
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Earnings per Common Share Attributable to CME Group: |
||||||||||||||||
Basic |
$ |
1.41 |
$ |
1.44 |
$ |
3.55 |
$ |
2.83 |
||||||||
Diluted |
1.40 |
1.43 |
3.54 |
2.82 |
||||||||||||
Weighted Average Number of Common Shares: |
||||||||||||||||
Basic |
357,691 |
357,060 |
357,607 |
356,973 |
||||||||||||
Diluted |
358,457 |
358,155 |
358,453 |
358,103 |
CME Group Inc. and Subsidiaries |
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Quarterly Operating Statistics |
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2Q 2019 |
3Q 2019 |
4Q 2019 |
1Q 2020 |
2Q 2020 |
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Trading Days |
63 |
64 |
64 |
62 |
63 |
Quarterly Average Daily Volume (ADV)(1) |
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CME Group ADV (in thousands) |
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Product Line |
2Q 2019 |
3Q 2019 |
4Q 2019 |
1Q 2020 |
2Q 2020 |
||||||||||
Interest rates |
11,593 |
10,868 |
8,638 |
13,813 |
6,890 |
||||||||||
Equity indexes |
3,480 |
3,931 |
3,252 |
6,498 |
5,568 |
||||||||||
Foreign exchange |
874 |
850 |
839 |
1,079 |
725 |
||||||||||
Energy |
2,498 |
2,456 |
2,213 |
3,228 |
2,586 |
||||||||||
Agricultural commodities |
1,839 |
1,320 |
1,278 |
1,506 |
1,311 |
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Metals |
633 |
821 |
652 |
889 |
519 |
||||||||||
Total |
20,918 |
20,247 |
16,872 |
27,013 |
17,599 |
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Venue |
|||||||||||||||
CME Globex |
18,505 |
18,282 |
15,356 |
24,582 |
16,992 |
||||||||||
Open outcry (2) |
1,501 |
1,177 |
867 |
1,281 |
— |
||||||||||
Privately negotiated |
912 |
788 |
650 |
1,149 |
607 |
||||||||||
Total |
20,918 |
20,247 |
16,872 |
27,013 |
17,599 |
Quarterly Average Rate Per Contract (RPC)(1) |
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CME Group RPC |
||||||||||||||||||||
Product Line |
2Q 2019 |
3Q 2019 |
4Q 2019 |
1Q 2020 |
2Q 2020 |
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Interest rates |
$ |
0.476 |
$ |
0.500 |
$ |
0.507 |
$ |
0.488 |
$ |
0.510 |
||||||||||
Equity indexes |
0.676 |
0.612 |
0.654 |
0.616 |
0.574 |
|||||||||||||||
Foreign exchange |
0.713 |
0.720 |
0.732 |
0.721 |
0.786 |
|||||||||||||||
Energy |
1.139 |
1.137 |
1.133 |
1.108 |
1.191 |
|||||||||||||||
Agricultural commodities |
1.222 |
1.234 |
1.242 |
1.260 |
1.316 |
|||||||||||||||
Metals |
1.455 |
1.414 |
1.344 |
1.429 |
1.518 |
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Average RPC |
$ |
0.693 |
$ |
0.693 |
$ |
0.717 |
$ |
0.676 |
$ |
0.731 |
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1. ADV and RPC includes futures and options on futures only. |
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2. The trading floor was temporarily closed in March 2020 in response to the stay-at-home orders. We plan a limited reopening in the third quarter. |
CME Group Inc. and Subsidiaries |
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Reconciliation of GAAP to non-GAAP Measures |
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(dollars in millions, except per share amounts; shares in thousands) |
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Quarter Ended |
Six Month Ended, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
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Net Income Attributable to CME Group |
$ |
503.3 |
$ |
513.8 |
$ |
1,269.5 |
$ |
1,010.7 |
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Restructuring and severance |
4.7 |
7.0 |
10.6 |
10.3 |
||||||||||||
Amortization of purchased intangibles |
76.6 |
76.1 |
153.9 |
156.8 |
||||||||||||
Acquisition-related costs(1) |
9.1 |
6.6 |
17.2 |
14.5 |
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Foreign exchange transaction (gains) losses(2) |
(0.1) |
(5.2) |
(3.7) |
2.4 |
||||||||||||
Unrealized and realized (gains) losses on investments |
5.4 |
23.3 |
2.5 |
26.7 |
||||||||||||
Loss on real estate sublease and related costs |
— |
5.0 |
— |
5.4 |
||||||||||||
(Gains) losses on derivatives |
— |
2.3 |
(1.5) |
16.7 |
||||||||||||
Realized and unrealized (gains) losses on assets(3) |
3.5 |
32.2 |
26.1 |
32.2 |
||||||||||||
Litigation matters |
4.0 |
— |
4.0 |
— |
||||||||||||
Trading floor enhancements |
1.0 |
— |
1.0 |
— |
||||||||||||
Income tax effect related to above |
(23.3) |
(29.5) |
(59.6) |
(57.3) |
||||||||||||
Other income tax items |
(1.0) |
— |
(1.0) |
(7.6) |
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Adjusted Net Income Attributable to CME Group |
$ |
583.2 |
$ |
631.6 |
$ |
1,419.0 |
$ |
1,210.8 |
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GAAP Earnings per Common Share Attributable to CME Group: |
||||||||||||||||
Basic |
$ |
1.41 |
$ |
1.44 |
$ |
3.55 |
$ |
2.83 |
||||||||
Diluted |
1.40 |
1.43 |
3.54 |
2.82 |
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Adjusted Earnings per Common Share Attributable to CME Group: |
||||||||||||||||
Basic |
$ |
1.63 |
$ |
1.77 |
$ |
3.97 |
$ |
3.39 |
||||||||
Diluted |
1.63 |
1.76 |
3.96 |
3.38 |
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Weighted Average Number of Common Shares: |
||||||||||||||||
Basic |
357,691 |
357,060 |
357,607 |
356,973 |
||||||||||||
Diluted |
358,457 |
358,155 |
358,453 |
358,103 |
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1. Acquisition-related costs primarily include professional fees related to the NEX transaction. |
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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. |
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3. Results include net gains and losses on intangible assets, fixed assets and assets held for sale. |