CME GROUP INC. Q4 FY2024 earnings call

• 2024 was CME Group's best year with average daily volume increasing 9% to 26.9 million contracts, a fourth consecutive year of record volume across all six asset classes. International business averaged 7.8 million contracts per day, up 14% from 2023.
• Customers are saving approximately $60 billion per day across all six asset classes due to CME Group's capital efficiencies. In 2024, commodities generated $1.7 billion in revenue, up 16% from 2023, and started 2025 strongly.
• New client acquisition across retail and institutional sectors has been a key driver, with approximately $1 billion in revenue from new clients added in the last five years, including 5% of transaction and clearing revenue in 2024. Marketing and education of potential new clients have been increased, especially for retail.

In 2024, CME Group achieved record financial results with revenue of $6.1 billion, a 10% increase compared to 2023. All six asset classes set all-time revenue records. The fourth quarter of 2024 saw revenue over $1.5 billion, a 6% increase from Q4 2023, with market data revenue growing 9% to $182 million. Commodities were the third fastest-growing asset class in 2024, with metals volume up 23%, energy up 17%, and ags up 13%. These businesses combined to generate a record $1.7 billion in revenue in 2024, up 16% versus 2023. Commodities growth came from various customer segments, including the buy side, and EMEA was the fastest-growing region for commodities volume, up 34% year-over-year. Commodity options also showed strong growth with volumes up 29% versus 2023.

• Expect total adjusted operating expenses (excluding license fees, including cloud migration) to be approximately $1.65 billion in 2025. Total capital expenditures are expected to be approximately $90 million.
• Adjusted effective tax rate should come in between 22.5% and 23.5%.
• Transaction fee adjustments, effective February 1, are expected to increase futures and options transaction revenue by approximately 1% to 1.5%. Market data fees were increased by 3.5% at the beginning of the year.
• A 10-basis-point non-cash collateral surcharge effective in April for participants not posting at least 30% of their margin requirement in cash, which could add 2% to 2.5% to pre-tax income assuming similar volume and collateral levels.

• Geopolitical tensions and potential changes in tariffs can impact market movement and the need for risk management.
• Persistent inflation and uncertainties in the global economy pose risks to market performance. Regulatory uncertainties related to market structure and product offerings can also affect the business.

Q: Patrick Moley of Piper Sandler asked about the rollout of futures to Robinhood's 24 million customers and the broader retail strategy.

A: Julie Winkler responded that about two-thirds of the $1 billion new client acquisition revenue are from the retail business, Q4 was strong with total participation and number of traders up, and Robinhood is doing a phased rollout. Terry Duffy added that the definition of retail is likely to evolve with technology and risk management tools.

Q: Alex Kramm of UBS asked about capital allocation, specifically buybacks.

A: Lynne Fitzpatrick said the buyback program is opportunistic, viewing it as a third means to return capital to shareholders along with dividends.

Q: Michael Cyprys of Morgan Stanley asked about product development opportunities around climate events.

A: Derek Sammann discussed how CME Group's products are being used in weather, energy, and metals markets to manage risk, and Terry Duffy mentioned the need for more tailored products for the insurance industry related to mortgages.

Q: Benjamin Budish of Barclays Capital asked about product expectations on the retail side.

A: Terry Duffy and Julie Winkler discussed the importance of education, speed-to-market, and the diversity of product suite in driving retail growth, with commodities and crypto showing increasing interest.

Q: Chris Allen of Citi asked about securities clearing build-out.

A: Suzanne Sprague said the application for a securities clearinghouse was published in the Federal Register and they continue engaging with the SEC, and Terry Duffy emphasized the benefits of clearing offering in freeing up capital for clients.

Q: Dan Fannon of Jefferies asked about the outlook for activity and M&A framework.

A: Terry Duffy discussed geopolitical and economic uncertainties impacting market activity, and Lynne Fitzpatrick mentioned the conservative approach to M&A, looking for clear path to value in core competencies.

Q: Brian Bedell of Deutsche Bank asked about retail theme and data analytics.

A: Terry Duffy and Julie Winkler talked about the evolving definition of retail, increased demand for data and analytics from retail users, and growth in non-professional device usage for data.

Q: Bill Katz of TD Cowen asked about regulatory backdrop on interest rate contracts and pricing.

A: Terry Duffy discussed regulatory clarity and the importance of default and resolution authority, and Lynne Fitzpatrick explained pricing adjustments considering mix of clearing, transaction, data, and collateral fees.

Q: Owen Lau of Oppenheimer asked about crypto expansion and RPC.

A: Terry Duffy and Tim McCourt talked about waiting for regulatory clarity on additional crypto products, and Lynne Fitzpatrick explained volume tiering impact on RPC.

Q: Kyle Voigt of KBW asked about commodities activity by multi-strat hedge funds.

A: Derek Sammann discussed the trend of multi-strat hedge funds increasing activity in commodities, seeing secular growth in buy-side participation and options growth.

Q: Madeline Daleiden of JPMorgan asked about BrokerTec market share.

A: Mike Dennis discussed BrokerTec's market share trends, noting slight changes in Q2 but improvement in January, and the strategic role of BrokerTec in driving core futures and options business.

Q: Simon Clinch of Redburn Atlantic asked about market data business and Google Cloud spend.

A: Julie Winkler talked about market data revenue growth driven by price increases and institutional interest, and Lynne Fitzpatrick provided details on Google Cloud spend in 2024 and 2025 guidance, focusing on migration and technology investment.