8-K
CME GROUP INC. (CME)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________________________________
FORM 8-K
_________________________________________________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) October 25, 2023
_________________________________________________________
CME GROUP INC.
(Exact Name of Registrant as Specified in its Charter)
_________________________________________________________
| Delaware | 001-31553 | 36-4459170 | |
|---|---|---|---|
| (State or Other Jurisdiction<br>of Incorporation) | (Commission<br>File No.) | (IRS Employer<br>Identification No.) | |
| 20 South Wacker Drive | Chicago | Illinois | 60606 |
| --- | --- | --- | --- |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (312) 930-1000
N/A
(Former Name or Former Address, if Changed Since Last Report)
______________________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | --- | --- || ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | | --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered |
|---|---|---|
| Class A Common Stock | CME | Nasdaq |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405) of this chapter or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of Operations and Financial Condition. |
|---|
The information set forth under “Item 2.02. Results Of Operations and Financial Condition,” including the Exhibit attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Attached and incorporated herein by reference as Exhibit 99.1 is a copy of a press release of CME Group Inc. dated October 25, 2023, reporting CME Group Inc.’s financial results for the quarter ended September 30, 2023.
To supplement CME Group’s financial statements on a GAAP basis, the attached press release includes financial measures that are not in accordance with GAAP, consisting of non-GAAP net income and earnings per share. Management believes that the presentation of non-GAAP net income and earnings per share provide important supplemental information to management and investors about financial and business trends relating to CME Group Inc.’s financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provide a better measure of comparability with the Company’s prior financial reports. Management acknowledges that non-GAAP adjustments may include recurring items. These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. Pursuant to the requirements of Regulation G, CME Group Inc. has included a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures in the press release.
| Item 9.01 | Financial Statements and Exhibits. | | --- | --- || Exhibit<br>Number | Description | | --- | --- | | 99.1 | Press Release, datedOctober 25, 2023 | | 104 | The cover page from CME Group Inc.'s Current Report on Form 8-K, formatted in Inline XBRL. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CME Group Inc. | ||
|---|---|---|
| Registrant | ||
| Date: October 25, 2023 | By: | /s/ Lynne Fitzpatrick |
| Name:<br><br>Title: | Lynne Fitzpatrick<br><br>Senior Managing Director and Chief Financial Officer<br><br>Principal Financial Offer and<br>Duly Authorized Officer |
Document
Exhibit 99.1
| Media contact | Investor contact |
|---|---|
| Timothy Barello, 212.299.2256 | Adam Minick, 312.340.8365 |
| Laurie Bischel, 312.648.8698 | investors@cmegroup.com |
| news@cmegroup.com | CME-G |
| www.cmegroup.com/media-room.html |
FOR IMMEDIATE RELEASE
CME Group Inc. Reports Third-Quarter 2023 Financial Results
CHICAGO, October 25, 2023 - CME Group Inc. (NASDAQ: CME) today reported financial results for the third quarter of 2023.
The company reported revenue of $1.3 billion and operating income of $820 million for the third quarter of 2023. Net income was $750 million and diluted earnings per common share were $2.06. On an adjusted basis, net income was $818 million and diluted earnings per common share were $2.25. Financial results presented on an adjusted basis for the third quarter of 2023 and 2022 exclude certain items, which are detailed in the reconciliation of non-GAAP results.1
"CME Group delivered its ninth consecutive quarter of double-digit growth in adjusted earnings per share and a 9% increase in revenue as market participants continued turning to our markets to mitigate their business risks amid accelerating geopolitical uncertainty," said CME Group Chairman and Chief Executive Officer Terry Duffy. "This was a particularly strong quarter, with interest rate volume increasing 6%, driven by an 18% rise in Treasury futures ADV and records in our Ultra 10-Year and Ultra T-Bond futures. We also generated significant growth across agricultural, energy and options products."
Third-quarter 2023 average daily volume (ADV) was 22.3 million contracts. Non-U.S. ADV reached 6.5 million contracts, up 7% from third-quarter 2022, including 16% growth in interest rates and double-digit growth across agricultural, energy and metals products.
- 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.
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Clearing and transaction fees revenue for third-quarter 2023 totaled $1.1 billion. The total average rate per contract was $0.707. Market data revenue totaled $168 million for third-quarter 2023.
As of September 30, 2023, the company had approximately $2.5 billion in cash (including $150 million deposited with Fixed Income Clearing Corporation, which is included in other current assets) and $3.4 billion of debt. The company paid dividends of approximately $400 million during the third quarter of 2023. The company has returned over $22 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 2023 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 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 rates, equity indexes, foreign exchange, energy, agricultural 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.
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 and EBS are trademarks of BrokerTec Europe LTD and EBS Group LTD, respectively. The S&P 500 Index is a product of S&P Dow Jones Indices LLC (“S&P DJI”). “S&P®”, “S&P 500®”, “SPY®”, “SPX®”, US 500 and The 500 are trademarks of Standard & Poor’s Financial Services LLC; Dow Jones®, DJIA® and Dow Jones Industrial Average are service and/or trademarks of Dow Jones Trademark Holdings LLC. These trademarks have been licensed for use by Chicago Mercantile Exchange Inc. Futures contracts based on the S&P 500 Index are not sponsored, endorsed, marketed, or promoted by S&P DJI, and S&P DJI makes no representation regarding the advisability of investing in such products. All other trademarks are the property of their respective owners.
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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; our ability to adjust our fixed costs and expenses if our revenues decline; our ability to maintain existing customers at substantially similar trading levels, 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 policies 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 programs 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; our dependence on third-party providers and exposure to risk through third parties, including risks related to the performance, reliability and security of technology used by our third-party providers and third party providers that our clients rely on; 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, social, 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 performance of our joint ventures with S&P Dow Jones (S&P Dow Jones Indices LLC) in index services and in trade processing/post trade services (OSTTRA), our primary data distribution partners’ actions and our partnership with Google Cloud; variances in earnings on cash accounts and collateral that our clearing house holds for its clients; impact of CME Group pricing and incentive changes; impact of aggregation services and internalization on trade flow and volumes; any negative financial impacts from changes to the terms of intellectual property and index rights; our ability to continue to generate funds and/or manage our indebtedness to allow us to continue to invest in our business; industry, channel partner and customer consolidation; decreases in trading and clearing activity; the imposition of a transaction tax or user fee on futures and options transactions and/or repeal of the 60/40 tax treatment of such transactions; our ability to maintain our brand and reputation; and the unfavorable resolution of material legal proceedings. For a detailed discussion and additional information concerning these and other factors that might affect our performance, see our other recent periodic filings, including our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission ("SEC") on February 27, 2023, under the caption "Risk Factors".
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CME Group Inc. and Subsidiaries
Consolidated Balance Sheets
(in millions)
| September 30, 2023 | December 31, 2022 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Current Assets: | ||||
| Cash and cash equivalents | $ | 2,300.2 | $ | 2,720.1 |
| Marketable securities | 104.1 | 96.0 | ||
| Accounts receivable, net of allowance | 558.4 | 483.2 | ||
| Other current assets (includes $5.1 and $4.9 in restricted cash) | 622.0 | 529.8 | ||
| Performance bonds and guaranty fund contributions | 87,192.1 | 135,249.2 | ||
| Total current assets | 90,776.8 | 139,078.3 | ||
| Property, net of accumulated depreciation and amortization | 417.3 | 455.5 | ||
| Intangible assets—trading products | 17,175.3 | 17,175.3 | ||
| Intangible assets—other, net | 3,095.4 | 3,269.7 | ||
| Goodwill | 10,477.6 | 10,482.5 | ||
| Other assets (includes $0.0 and $0.1 in restricted cash) | 3,655.8 | 3,714.4 | ||
| Total Assets | $ | 125,598.2 | $ | 174,175.7 |
| LIABILITIES AND EQUITY | ||||
| Current Liabilities: | ||||
| Accounts payable | $ | 53.8 | $ | 121.4 |
| Short-term debt | — | 16.0 | ||
| Other current liabilities | 634.6 | 2,300.9 | ||
| Performance bonds and guaranty fund contributions | 87,192.1 | 135,249.2 | ||
| Total current liabilities | 87,880.5 | 137,687.5 | ||
| Long-term debt | 3,424.7 | 3,422.4 | ||
| Deferred income tax liabilities, net | 5,332.7 | 5,361.1 | ||
| Other liabilities | 808.7 | 826.0 | ||
| Total Liabilities | 97,446.6 | 147,297.0 | ||
| Total CME Group Shareholders’ Equity | 28,151.6 | 26,878.7 | ||
| Total Liabilities and Equity | $ | 125,598.2 | $ | 174,175.7 |
CME Group Inc. and Subsidiaries
Consolidated Statements of Income
(dollars in millions, except per share amounts; shares in thousands)
| Quarter Ended <br>September 30, | Nine Months Ended, <br>September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | |||||
| Revenues | ||||||||
| Clearing and transaction fees | $ | 1,085.5 | $ | 998.6 | $ | 3,404.0 | $ | 3,161.3 |
| Market data and information services | 167.6 | 154.3 | 496.5 | 457.7 | ||||
| Other | 84.7 | 74.9 | 239.1 | 192.6 | ||||
| Total Revenues | 1,337.8 | 1,227.8 | 4,139.6 | 3,811.6 | ||||
| Expenses | ||||||||
| Compensation and benefits | 205.5 | 189.6 | 615.7 | 560.1 | ||||
| Technology | 55.6 | 46.8 | 160.2 | 138.6 | ||||
| Professional fees and outside services | 32.2 | 35.1 | 108.3 | 98.9 | ||||
| Amortization of purchased intangibles | 57.2 | 55.5 | 171.0 | 171.0 | ||||
| Depreciation and amortization | 31.1 | 34.5 | 95.3 | 101.0 | ||||
| Licensing and other fee agreements | 79.5 | 83.6 | 242.4 | 247.6 | ||||
| Other | 56.5 | 43.9 | 174.2 | 146.8 | ||||
| Total Expenses | 517.6 | 489.0 | 1,567.1 | 1,464.0 | ||||
| Operating Income | 820.2 | 738.8 | 2,572.5 | 2,347.6 | ||||
| Non-Operating Income (Expense) | ||||||||
| Investment income | 1,272.5 | 686.2 | 4,198.4 | 1,046.2 | ||||
| Interest and other borrowing costs | (39.6) | (40.4) | (119.7) | (122.8) | ||||
| Equity in net earnings of unconsolidated subsidiaries | 76.8 | 76.5 | 230.1 | 237.1 | ||||
| Other non-operating income (expense) | (1,155.6) | (581.1) | (3,733.7) | (845.1) | ||||
| Total Non-Operating Income (Expense) | 154.1 | 141.2 | 575.1 | 315.4 | ||||
| Income before Income Taxes | 974.3 | 880.0 | 3,147.6 | 2,663.0 | ||||
| Income tax provision | 224.1 | 200.4 | 736.0 | 609.9 | ||||
| Net Income | $ | 750.2 | $ | 679.6 | $ | 2,411.6 | $ | 2,053.1 |
| Net Income Attributable to Common Shareholders of CME Group | $ | 740.8 | $ | 671.1 | $ | 2,381.3 | $ | 2,027.2 |
| Earnings per Share Attributable to Common Shareholders of CME Group: | ||||||||
| Basic | $ | 2.06 | $ | 1.87 | $ | 6.63 | $ | 5.65 |
| Diluted | 2.06 | 1.87 | 6.62 | 5.64 | ||||
| Weighted Average Number of Common Shares: | ||||||||
| Basic | 359,020 | 358,715 | 358,965 | 358,655 | ||||
| Diluted | 359,619 | 359,288 | 359,448 | 359,206 |
CME Group Inc. and Subsidiaries
Quarterly Operating Statistics
| 3Q 2022 | 4Q 2022 | 1Q 2023 | 2Q 2023 | 3Q 2023 | |
|---|---|---|---|---|---|
| Trading Days | 64 | 63 | 62 | 62 | 63 |
Quarterly Average Daily Volume (ADV)(1)
CME Group ADV (in thousands)
| Product Line | 3Q 2022 | 4Q 2022 | 1Q 2023 | 2Q 2023 | 3Q 2023 |
|---|---|---|---|---|---|
| Interest rates | 10,357 | 9,832 | 14,490 | 11,273 | 10,967 |
| Equity indexes | 7,445 | 7,465 | 7,303 | 6,216 | 6,353 |
| Foreign exchange | 1,091 | 1,000 | 969 | 898 | 942 |
| Energy | 1,837 | 1,829 | 2,083 | 2,104 | 2,126 |
| Agricultural commodities | 1,208 | 1,171 | 1,379 | 1,752 | 1,433 |
| Metals | 498 | 508 | 649 | 612 | 528 |
| Total | 22,437 | 21,803 | 26,873 | 22,855 | 22,349 |
| Venue | |||||
| CME Globex | 21,021 | 20,279 | 24,171 | 20,907 | 20,838 |
| Open outcry | 704 | 746 | 1,623 | 1,124 | 713 |
| Privately negotiated | 711 | 778 | 1,080 | 825 | 797 |
| Total | 22,437 | 21,803 | 26,873 | 22,855 | 22,349 |
Quarterly Average Rate Per Contract (RPC)(1)
CME Group RPC
| Product Line | 3Q 2022 | 4Q 2022 | 1Q 2023 | 2Q 2023 | 3Q 2023 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Interest rates | $ | 0.479 | $ | 0.500 | $ | 0.495 | $ | 0.505 | $ | 0.508 |
| Equity indexes | 0.524 | 0.535 | 0.595 | 0.644 | 0.625 | |||||
| Foreign exchange | 0.729 | 0.756 | 0.790 | 0.800 | 0.791 | |||||
| Energy | 1.140 | 1.181 | 1.300 | 1.347 | 1.324 | |||||
| Agricultural commodities | 1.351 | 1.356 | 1.349 | 1.356 | 1.328 | |||||
| Metals | 1.520 | 1.519 | 1.517 | 1.487 | 1.492 | |||||
| Average RPC | $ | 0.631 | $ | 0.651 | $ | 0.664 | $ | 0.724 | $ | 0.707 |
| 1. ADV and RPC includes futures and options on futures only. | ||||||||||
| CME Group Inc. and Subsidiaries | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | |||
| Reconciliation of GAAP to non-GAAP Measures | ||||||||||
| (dollars in millions, except per share amounts; shares in thousands) | ||||||||||
| Nine Months Ended, <br>September 30, | ||||||||||
| 2022 | 2023 | 2022 | ||||||||
| Net Income | 750.2 | $ | 679.6 | $ | 2,411.6 | $ | 2,053.1 | |||
| Restructuring and severance | — | 14.9 | 10.2 | |||||||
| Amortization of purchased intangibles(1) | 68.5 | 211.3 | 206.4 | |||||||
| Strategic transaction-related costs (credits) | 1.2 | (2.2) | 3.4 | |||||||
| Foreign exchange transaction (gains) losses | (10.5) | (0.1) | (23.6) | |||||||
| Unrealized and realized (gains) losses on investments | (1.1) | (71.8) | (4.6) | |||||||
| Unrealized and realized (gains) losses on assets | 0.7 | 0.4 | 0.7 | |||||||
| Debt costs related to refinancing | — | — | 7.7 | |||||||
| Trading floor enhancements | — | — | 4.8 | |||||||
| Litigation Matters or Settlements | — | 2.0 | — | |||||||
| Income tax effect related to above | (11.3) | (28.6) | (40.1) | |||||||
| Other income tax items | (8.0) | (0.8) | (16.2) | |||||||
| Adjusted Net Income | 818.0 | $ | 719.1 | $ | 2,536.7 | $ | 2,201.8 | |||
| Adjusted Net Income Attributable to Common Shareholders of CME Group | 807.8 | $ | 710.0 | $ | 2,504.8 | $ | 2,174.1 | |||
| Earnings per Share Attributable to Common Shareholders of CME Group: | ||||||||||
| Basic | 2.06 | $ | 1.87 | $ | 6.63 | $ | 5.65 | |||
| Diluted | 1.87 | 6.62 | 5.64 | |||||||
| Adjusted Earnings per Share Attributable to Common Shareholders of CME Group: | ||||||||||
| Basic | 2.25 | $ | 1.98 | $ | 6.98 | $ | 6.06 | |||
| Diluted | 1.98 | 6.97 | 6.05 | |||||||
| Weighted Average Number of Common Shares: | ||||||||||
| Basic | 358,715 | 358,965 | 358,655 | |||||||
| Diluted | 359,288 | 359,448 | 359,206 | |||||||
| Preferred shares(2) | 4,584 | 4,584 | 4,584 | |||||||
| 1. Includes 11.1 million of amortization of purchased intangibles (net of tax) at OSTTRA and 2.5 million of amortization of purchased intangibles at S&P Dow Jones Indices LLC, reported in Equity in net earnings of unconsolidated subsidiaries on the Consolidated Statements of Income. | ||||||||||
| 2. Preferred shares have similar rights as common shares without voting rights. |
All values are in US Dollars.