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Intercontinental Exchange Reports Strong First Quarter 2023

Intercontinental Exchange (NYSE: ICE):

  • 1Q23 net revenues of $1.9 billion; recurring revenues +4% y/y
  • 1Q23 GAAP diluted earnings per share (EPS) of $1.17
  • 1Q23 adj. diluted earnings per share of $1.41
  • 1Q23 operating margin of 51%; adj. operating margin of 61%
  • Record exchanges net revenues +1% y/y; +3% y/y, constant currency (CC)*
  • Record fixed income & data services revenues, +11% y/y; +12% y/y, CC*
  • Top five global bank to replace in-house mortgage technology with Encompass

 

Jeffrey C. Sprecher,

ICE Chair & Chief Executive Officer, said,

"We are pleased to report solid first quarter results. Amidst a dynamic macroeconomic environment, our customers continue to rely on our mission-critical data and technology to provide transparency and efficiencies across asset classes and through an array of macroeconomic environments - a testament to the resiliency of our business model. As we look to the balance of the year and beyond, ICE's diverse platform is well positioned to continue to serve our customers, generate growth and create value for our stockholders."

Intercontinental Exchange (NYSE: ICE), a leading global provider of data, technology and market infrastructure, today reported financial results for the first quarter of 2023. For the quarter ended March 31, 2023, consolidated net income attributable to ICE was $655 million on $1.9 billion of consolidated revenues, less transaction-based expenses. First quarter GAAP diluted earnings per share was $1.17. Adjusted net income attributable to ICE was $791 million in the first quarter and adjusted diluted EPS was $1.41. Please refer to the reconciliation of non-GAAP financial measures included in this press release for more information on our adjusted operating expenses, adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted EPS and adjusted free cash flow.

Warren Gardiner, ICE Chief Financial Officer, added: "We delivered another quarter of strong operating results, including compounding growth in our recurring revenues across all three business segments. We remain well positioned to benefit from near-term cyclical tailwinds, longer-term secular trends and are focused on investing in profitable growth to create value for our stockholders."

*Constant currency (CC) percentage changes are calculated holding both the pound sterling and euro at the average exchange rate from 1Q22, 1.3424 and 1.1229, respectively.

First Quarter 2023 Business Highlights

First quarter consolidated net revenues were $1.9 billion year-over-year including exchange net revenues of $1.1 billion, fixed income and data services revenues of $563 million and mortgage technology revenues of $236 million. Consolidated operating expenses were $927 million for the first quarter of 2023. On an adjusted basis, consolidated operating expenses were $740 million. Consolidated operating income for the first quarter was $969 million and the operating margin was 51%. On an adjusted basis, consolidated operating income for the first quarter was $1.2 billion and the adjusted operating margin was 61%.

$ (in millions)

Net

Revenue

Op

Margin

Adj Op

Margin

 

1Q23

Exchanges

$1,097

70%

74%

Fixed Income and Data Services

$563

39%

47%

Mortgage Technology

$236

(7)%

36%

Consolidated

$1,896

51%

61%

 

 

 

 

 

1Q23

1Q22

% Chg

Recurring Revenue

$953

$921

4%

Transaction Revenue, net

$943

$978

(4)%

Exchanges Segment Results

First quarter exchange net revenues were $1.1 billion. Exchange operating expenses were $332 million and on an adjusted basis, were $288 million in the first quarter. Segment operating income for the first quarter was $765 million and the operating margin was 70%. On an adjusted basis, operating income was $809 million and the adjusted operating margin was 74%.

$ (in millions)

1Q23

1Q22

% Chg

Const

Curr(1)

Revenue, net:

 

 

 

 

Energy

$345

$353

(2)%

(1)%

Ags and Metals

70

61

14%

15%

Financials(2)

128

130

(1)%

6%

Cash Equities and Equity Options

95

99

(4)%

(4)%

OTC and Other(3)

101

97

4%

6%

Data and Connectivity Services

232

214

8%

8%

Listings

126

129

(2)%

(2)%

Segment Revenue

$1,097

$1,083

1%

3%

 

 

 

 

 

Recurring Revenue

$358

$343

5%

5%

Transaction Revenue, net

$739

$740

—%

2%

(1) Net revenues in constant currency are calculated holding both the pound sterling and euro at the average exchange rate from 1Q22, 1.3424 and 1.1229, respectively.

(2) Financials include interest rates and other financial futures and options.

(3) OTC & other includes physical energy, interest income on certain clearing margin deposits, regulatory penalties and fines, fees for use of our facilities, regulatory fees charged to member organizations of our U.S. securities exchanges, designated market maker service fees, technology development fees, exchange member fees, and agriculture grading and certification fees.

Fixed Income and Data Services Segment Results

First quarter fixed income and data services revenues were $563 million. Fixed income and data services operating expenses were $343 million and adjusted operating expenses were $301 million in the first quarter. Segment operating income for the first quarter was $220 million and the operating margin was 39%. On an adjusted basis, operating income was $262 million and the adjusted operating margin was 47%.

$ (in millions)

1Q23

1Q22

% Chg

Const

Curr(1)

Revenue:

 

 

 

 

Fixed Income Execution

$32

$15

106%

106%

CDS Clearing

101

72

41%

42%

Fixed Income Data and Analytics

276

277

—%

—%

Other Data and Network Services

154

145

6%

8%

Segment Revenue

$563

$509

11%

12%

 

 

 

 

 

Recurring Revenue

$430

$422

2%

3%

Transaction Revenue

$133

$87

53%

54%

(1) Net revenues in constant currency are calculated holding both the pound sterling and euro at the average exchange rate from 1Q22, 1.3424 and 1.1229, respectively.

Mortgage Technology Segment Results

First quarter mortgage technology revenues were $236 million. Mortgage technology operating expenses were $252 million and adjusted operating expenses were $151 million in the first quarter. Segment operating loss for the first quarter was $16 million and the operating margin was (7)%. On an adjusted basis, operating income was $85 million and the adjusted operating margin was 36%.

$ (in millions)

1Q23

1Q22

% Chg

Revenue:

 

 

 

Origination Technology

$167

$203

(18)%

Closing Solutions

40

72

(45)%

Data and Analytics

21

20

10%

Other

8

12

(30)%

Segment Revenue

$236

$307

(23)%

 

 

 

 

Recurring Revenue

$165

$156

6%

Transaction Revenue

$71

$151

(53)%

Other Matters

  • The effective tax rate for the first quarter of 2023 was 21%.
  • Operating cash flow in the first quarter of 2023 was $653 million and adjusted free cash flow was $673 million.
  • Unrestricted cash was $2.1 billion and outstanding debt was $18.1 billion as of March 31, 2023.
  • Through the first quarter of 2023, ICE paid $236 million in dividends.

Updated Financial Guidance

  • ICE's second quarter 2023 GAAP operating expenses are expected to be in a range of $905 million to $915 million. Adjusted operating expenses(1) are expected to be in a range of $763 million to $773 million.
  • ICE's second quarter 2023 GAAP non-operating expense(2) is expected to be in the range of $105 million to $110 million. Adjusted non-operating expense is expected to be in the range of $85 million to $90 million.
  • ICE's diluted share count for the second quarter is expected to be in the range of 559 million to 564 million weighted average shares outstanding.

(1) 2Q23 non-GAAP operating expenses exclude amortization of acquisition-related intangibles, pending Black Knight acquisition costs, and Ellie Mae integration costs.

(2) Non-operating expense includes interest income, interest expense and net other income/expense. Non-GAAP non-operating expense excludes equity earnings/losses from unconsolidated investees and net interest on pre-acquisition related debt.

Earnings Conference Call Information

ICE will hold a conference call today, May 4, 2023, at 8:30 a.m. ET to review its first quarter 2023 financial results. A live audio webcast of the earnings call will be available on the company's website at www.theice.com in the investor relations section. Participants may also listen via telephone by dialing 833-470-1428 from the United States or 929-526-1599 from outside of the United States. Telephone participants are required to provide the participant entry number 284962 and are recommended to call 10 minutes prior to the start of the call. The call will be archived on the company's website for replay.

The conference call for the second quarter 2023 earnings has been scheduled for August 3rd, 2023 at 8:30 a.m. ET. Please refer to the Investor Relations website at www.ir.theice.com for additional information.

Historical futures, options and cash ADV, rate per contract, open interest data and CDS cleared information can be found at: https://ir.theice.com/investor-resources/supplemental-information/default.aspx

 

Consolidated Statements of Income

(In millions, except per share amounts)

(Unaudited)

 

 

Three Months Ended

March 31,

Revenues:

 

2023

 

 

2022

 

Exchanges

$

1,673

 

$

1,643

 

Fixed income and data services

 

563

 

 

509

 

Mortgage technology

 

236

 

 

307

 

Total revenues

 

2,472

 

 

2,459

 

Transaction-based expenses:

 

 

Section 31 fees

 

119

 

 

51

 

Cash liquidity payments, routing and clearing

 

457

 

 

509

 

Total revenues, less transaction-based expenses

 

1,896

 

 

1,899

 

 

 

 

Operating expenses:

 

 

Compensation and benefits

 

352

 

 

359

 

Professional services

 

28

 

 

34

 

Acquisition-related transaction and integration costs

 

21

 

 

9

 

Technology and communication

 

172

 

 

175

 

Rent and occupancy

 

20

 

 

21

 

Selling, general and administrative

 

74

 

 

55

 

Depreciation and amortization

 

260

 

 

254

 

Total operating expenses

 

927

 

 

907

 

Operating income

 

969

 

 

992

 

Other income/(expense):

 

 

Interest income

 

91

 

 

1

 

Interest expense

 

(176

)

 

(103

)

Other expense, net

 

(35

)

 

(58

)

Other income/(expense), net

 

(120

)

 

(160

)

Income before income tax expense

 

849

 

 

832

 

Income tax expense

 

175

 

 

165

 

Net income

$

674

 

$

667

 

Net income attributable to non-controlling interest

 

(19

)

 

(10

)

Net income attributable to Intercontinental Exchange, Inc.

$

655

 

$

657

 

 

 

 

Earnings per share attributable to Intercontinental Exchange, Inc. common stockholders:

 

 

Basic

$

1.17

 

$

1.17

 

Diluted

$

1.17

 

$

1.16

 

Weighted average common shares outstanding:

 

 

Basic

 

559

 

 

561

 

Diluted

 

561

 

 

564

 

 

Consolidated Balance Sheets

(In millions)

 

 

As of

 

 

March 31, 2023

As of

 

(Unaudited)

December 31, 2022

Assets:

 

 

Current assets:

 

 

Cash and cash equivalents

$

2,069

 

$

1,799

 

Short-term restricted cash and cash equivalents

 

6,145

 

 

6,149

 

Cash and cash equivalent margin deposits and guaranty funds

 

102,072

 

 

141,990

 

Invested deposits, delivery contracts receivable and unsettled variation margin

 

1,897

 

 

5,382

 

Customer accounts receivable, net

 

1,650

 

 

1,169

 

Prepaid expenses and other current assets

 

503

 

 

458

 

Total current assets

 

114,336

 

 

156,947

 

Property and equipment, net

 

1,727

 

 

1,767

 

Other non-current assets:

 

 

Goodwill

 

21,120

 

 

21,111

 

Other intangible assets, net

 

12,946

 

 

13,090

 

Long-term restricted cash and cash equivalents

 

405

 

 

405

 

Other non-current assets

 

1,016

 

 

1,018

 

Total other non-current assets

 

35,487

 

 

35,624

 

Total assets

$

151,550

 

$

194,338

 

 

 

 

Liabilities and Equity:

 

 

Current liabilities:

 

 

Accounts payable and accrued liabilities

$

949

 

$

866

 

Section 31 fees payable

 

118

 

 

223

 

Accrued salaries and benefits

 

146

 

 

352

 

Deferred revenue

 

562

 

 

170

 

Short-term debt

 

 

 

4

 

Margin deposits and guaranty funds

 

102,072

 

 

141,990

 

Invested deposits, delivery contracts payable and unsettled variation margin

 

1,897

 

 

5,382

 

Other current liabilities

 

262

 

 

184

 

Total current liabilities

 

106,006

 

 

149,171

 

Non-current liabilities:

 

 

Non-current deferred tax liability, net

 

3,409

 

 

3,493

 

Long-term debt

 

18,123

 

 

18,118

 

Accrued employee benefits

 

157

 

 

160

 

Non-current operating lease liability

 

233

 

 

254

 

Other non-current liabilities

 

411

 

 

381

 

Total non-current liabilities

 

22,333

 

 

22,406

 

Total liabilities

 

128,339

 

 

171,577

 

 

 

 

Equity:

 

 

Intercontinental Exchange, Inc. stockholders’ equity:

 

 

Common stock

 

6

 

 

6

 

Treasury stock, at cost

 

(6,274

)

 

(6,225

)

Additional paid-in capital

 

14,388

 

 

14,313

 

Retained earnings

 

15,362

 

 

14,943

 

Accumulated other comprehensive loss

 

(315

)

 

(331

)

Total Intercontinental Exchange, Inc. stockholders’ equity

 

23,167

 

 

22,706

 

Non-controlling interest in consolidated subsidiaries

 

44

 

 

55

 

Total equity

 

23,211

 

 

22,761

 

Total liabilities and equity

$

151,550

 

$

194,338

 

Non-GAAP Financial Measures and Reconciliation

We use non-GAAP measures internally to evaluate our performance and in making financial and operational decisions. When viewed in conjunction with our GAAP results and the accompanying reconciliation, we believe that our presentation of these measures provides investors with greater transparency and a greater understanding of factors affecting our financial condition and results of operations than GAAP measures alone. In addition, we believe the presentation of these measures is useful to investors for period-to-period comparison of results because the items described below as adjustments to GAAP are not reflective of our core business performance. These financial measures are not in accordance with, or an alternative to, GAAP financial measures and may be different from non-GAAP measures used by other companies. We use these adjusted results because we believe they more clearly highlight trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures, since these measures eliminate from our results specific financial items that have less bearing on our core operating performance. We strongly recommend that investors review the GAAP financial measures and additional non-GAAP information included in our Quarterly Report on Form 10-Q, including our consolidated financial statements and the notes thereto.

Adjusted operating expenses, adjusted operating income, adjusted operating margin, adjusted net income attributable to ICE common stockholders, adjusted diluted earnings per share and adjusted free cash flow for the periods presented below are calculated by adding or subtracting the adjustments described below, which are not reflective of our cash operations and core business performance, and their related income tax effect and other tax adjustments (in millions, except for per share amounts):

 

Adjusted Operating Income, Operating Margin and Operating Expense Reconciliation

(In millions)

(Unaudited)

 

 

Exchanges

Segment

 

Fixed Income

and Data

Services

Segment

 

Mortgage

Technology

Segment

 

Consolidated

 

Three Months Ended

March 31,

 

Three Months Ended

March 31,

 

Three Months Ended

March 31,

 

Three Months Ended

March 31,

 

2023

 

2022

 

2023

 

2022

 

2023

 

2022

 

2023

 

2022

Total revenues, less transaction-based expenses

$1,097

 

$1,083

 

$563

 

$509

 

$236

 

$307

 

$1,896

 

$1,899

Operating expenses

332

 

299

 

343

 

354

 

252

 

254

 

927

 

907

Less: Amortization of acquisition-related intangibles

16

 

16

 

42

 

49

 

92

 

88

 

150

 

153

Less: Transaction and integration costs

12

 

 

 

 

9

 

8

 

21

 

8

Less: Other

16

 

 

 

 

 

 

16

 

Adjusted operating expenses

$288

 

$283

 

$301

 

$305

 

$151

 

$158

 

$740

 

$746

Operating income/(loss)

$765

 

$784

 

$220

 

$155

 

$(16)

 

$53

 

$969

 

$992

Adjusted operating income

$809

 

$800

 

$262

 

$204

 

$85

 

$149

 

$1,156

 

$1,153

Operating margin

70%

 

72%

 

39%

 

30%

 

(7)%

 

17%

 

51%

 

52%

Adjusted operating margin

74%

 

74%

 

47%

 

40%

 

36%

 

49%

 

61%

 

61%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income Attributable to ICE and Diluted EPS

(In millions)

(Unaudited)

 

 

Three Months Ended

March 31, 2023

 

Three Months Ended

March 31, 2022

Net income attributable to ICE

$

655

 

 

$

657

 

Add: Amortization of acquisition-related intangibles

 

150

 

 

 

153

 

Add: Transaction and integration costs

 

21

 

 

 

8

 

Less: Net interest income on pre-acquisition-related debt

 

(6

)

 

 

 

Add: Net losses from unconsolidated investees

 

35

 

 

 

42

 

Add: Other

 

16

 

 

 

9

 

Less: Income tax effect for the above items

 

(57

)

 

 

(58

)

Add/(Less): Deferred tax adjustments on acquisition-related intangibles

 

1

 

 

 

(7

)

Less: Other tax adjustments

 

(24

)

 

 

 

Adjusted net income attributable to ICE

$

791

 

 

$

804

 

 

 

 

 

Diluted earnings per share

$

1.17

 

 

$

1.16

 

 

 

 

 

Adjusted diluted earnings per share

$

1.41

 

 

$

1.43

 

 

 

 

 

Diluted weighted average common shares outstanding

 

561

 

 

 

564

 

 

Adjusted Free Cash Flow Calculation

(In millions)

(Unaudited)

 

 

Three Months Ended

March 31, 2023

Three Months Ended

March 31, 2022

Cash flow from operations

$653

 

$756

 

Less: Capital expenditures and capitalized software development costs

(85

)

(103

)

Add: Section 31 fees, net

105

 

7

 

Adjusted free cash flow

$673

 

$660

 

About Intercontinental Exchange

Intercontinental Exchange, Inc. (NYSE: ICE) is a Fortune 500 company that designs, builds and operates digital networks to connect people to opportunity. We provide financial technology and data services across major asset classes that offer our customers access to mission-critical workflow tools that increase transparency and operational efficiencies. We operate exchanges, including the New York Stock Exchange, and clearing houses that help people invest, raise capital and manage risk across multiple asset classes. Our comprehensive fixed income data services and execution capabilities provide information, analytics and platforms that help our customers capitalize on opportunities and operate more efficiently. At ICE Mortgage Technology, we are transforming and digitizing the U.S. residential mortgage process, from consumer engagement through loan registration. Together, we transform, streamline and automate industries to connect our customers to opportunity.

Trademarks of ICE and/or its affiliates include Intercontinental Exchange, ICE, ICE block design, NYSE and New York Stock Exchange. Information regarding additional trademarks and intellectual property rights of Intercontinental Exchange, Inc. and/or its affiliates is located at http://www.intercontinentalexchange.com/terms-of-use. Key Information Documents for certain products covered by the EU Packaged Retail and Insurance-based Investment Products Regulation can be accessed on the relevant exchange website under the heading “Key Information Documents (KIDS).”

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 - Statements in this press release regarding ICE's business that are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of additional risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see ICE's Securities and Exchange Commission (SEC) filings, including, but not limited to, the risk factors in Intercontinental Exchange, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 2, 2023. We caution you not to place undue reliance on these forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of an unanticipated event. New factors emerge from time to time, and it is not possible for management to predict all factors that may affect our business and prospects. Further, management cannot assess the impact of each factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Category: Corporate

SOURCE: Intercontinental Exchange

ICE-CORP

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