Intercontinental Exchange Reports Second Quarter 2019

Intercontinental Exchange (NYSE: ICE), a leading operator of global exchanges and clearing houses and provider of data and listing services, today reported financial results for the second quarter of 2019. For the quarter ended June 30, 2019, consolidated net income attributable to ICE was $472 million on $1.3 billion of consolidated revenues, less transaction-based expenses. Second quarter GAAP diluted earnings per share (EPS) were $0.84. Adjusted net income attributable to ICE was $534 million in the second quarter and adjusted diluted EPS were $0.94. 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 free cash flow.

“We are pleased to report our second quarter results, which extends our track record of revenue and earnings-per-share growth. These results reflect the strength of our global energy business as well as the value of compounding growth in our subscription-based Data & Listings business,” said ICE Chairman and Chief Executive Officer, Jeffrey C. Sprecher. “We remain focused on innovating for our customers, investing in future growth and creating value for our stakeholders.”

Scott A. Hill, ICE Chief Financial Officer, added: “Through the first half of the year, we have grown revenues, earnings-per-share and cash flows, enabling us to return over $1 billion to stockholders. As we look to the second half of 2019, we remain focused on disciplined investment in support of our strategic growth initiatives.”

Second Quarter 2019 Business Highlights
 

$ in millions

Net
Revenue

Op
Margin

Adj Op
Margin

 

 

 

 

Data & Listings

$664

44%

53%

Trading & Clearing

$634

61%

64%

Consolidated

$1,298

52%

58%

Second quarter consolidated net revenues were $1.3 billion, up 4% year-over-year. Data and listings revenues in the second quarter were $664 million and trading and clearing net revenues were $634 million. Consolidated operating expenses were $618 million for the second quarter of 2019. On an adjusted basis, consolidated operating expenses were $540 million. Consolidated operating income for the second quarter was $680 million and the operating margin was 52%. On an adjusted basis, consolidated operating income for the second quarter was $758 million and the adjusted operating margin was 58%.

Data and Listings Segment Results

Second quarter data and listings revenues were $664 million, including data revenues of $553 million, up 5% year-over-year, and listings revenues of $111 million, up 1% year-over-year. On a constant currency basis(1), segment revenues were up 5% with data revenues up 6% year-over-year and listings revenues up 1% year-over-year. Data and listings operating expenses were $369 million and on an adjusted basis, were $314 million in the second quarter. Segment operating income for the second quarter was $295 million and the operating margin was 44%. On an adjusted basis, operating income was $350 million and the adjusted operating margin was 53%.

$ in millions

2Q19

2Q18

% Chg

Const
Curr(1)

Revenue:

 

 

 

 

Pricing and Analytics

$270

$262

3%

4%

Exchange Data and Feeds

180

164

9%

9%

Desktops and Connectivity

103

100

4%

5%

Data Total

553

526

5%

6%

Listings

111

111

1%

1%

Segment Revenue

$664

$637

4%

5%

(1) Net revenues in constant currency are calculated holding both the pound sterling and euro at the average exchange rate from 2Q18, 1.3606 and 1.1918, respectively.

Trading and Clearing Segment Results

Second quarter trading and clearing net revenues were $634 million, up 4% from one year ago. Trading and clearing operating expenses were $249 million and adjusted operating expenses were $226 million in the second quarter. Segment operating income for the second quarter was $385 million and the operating margin was 61%. On an adjusted basis, operating income was $408 million and the adjusted operating margin was 64%.

     

$ in millions

2Q19

2Q18

% Chg

     

Revenue, net:

 

 

 

     

Energy

$255

$250

2%

     

Ags & metals

72

74

(2)%

     

Financials(1)

78

94

(17)%

     

Cash equities & equity options

74

79

(7)%

     

Fixed income & credit(2)

80

45

77%

     

OTC & other transaction(3)

12

12

(5)%

     

Other revenue(4)

63

55

15%

     

Segment Revenue

$634

$609

4%

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

(2) Fixed income and credit includes fixed income execution, CDS execution and clearing and ICE Mortgage Services.

(3) OTC & other transactions include physical energy.

(4) Other revenue includes 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, exchange member fees, and agriculture grading and certification fees.

     

 

ADV

(lots in thousands)

RPC

     

 

2Q19

% Chg

2Q19

% Chg

     

Energy

2,694

(2)%

$1.50

5%

     

Ags & metals

498

4%

$2.31

(4)%

     

Financials

2,369

(18)%

$0.51

5%

     

Interest Rates

1,961

(21)%

$0.36

(8)%

     

Other Financials

408

(5)%

$1.25

17%

     

Total Futures & Options

5,561

(9)%

$1.15

9%

     

 

 

 

 

 

     

Cash Equities (in millions)

1,733

9%

$0.046

(14)%

     

Equity Options

3,169

2%

$0.12

(6)%

The second quarter of 2019 included 63 trading days for commodities, interest rates, other financials, cash equities and equity options. The second quarter of 2018 included 64 trading days for commodities, interest rates, other financials, cash equities and equity options.

Other Matters

Financial Guidance

(1) The 2019 Non-GAAP adjusted operating expense excludes $80 million in amortization of acquisition-related intangibles for the third quarter of 2019 and $310 million for the full year.  The GAAP operating expense forecast does not reflect an estimate of acquisition-related transaction and integration costs for the third quarter of 2019.

Earnings Conference Call Information

ICE will hold a conference call today, August 1, 2019, at 8:30 a.m. ET to review its second quarter 2019 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 888-317-6003 from the United States, 866-284-3684 from Canada or 412-317-6061 from outside of the United States and Canada. Telephone participants are required to provide the participant entry number 2993459 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 third quarter 2019 earnings has been scheduled for October 31, 2019 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: http://ir.theice.com/investors-and-media/supplemental-volume-info/default.aspx

 

Consolidated Statements of Income

(In millions, except per share amounts)

(Unaudited)

 

 

Six Months Ended
June 30,

Three Months Ended
June 30,

Revenues:

2019

2018

2019

2018

Transaction and clearing, net

$

1,769

 

$

1,762

 

$

907

 

$

864

 

Data services

1,099

 

1,046

 

553

 

526

 

Listings

222

 

220

 

111

 

111

 

Other revenues

127

 

108

 

63

 

55

 

Total revenues

3,217

 

3,136

 

1,634

 

1,556

 

Transaction-based expenses:

 

 

 

 

Section 31 fees

169

 

211

 

100

 

90

 

Cash liquidity payments, routing and clearing

480

 

454

 

236

 

220

 

Total revenues, less transaction-based expenses

2,568

 

2,471

 

1,298

 

1,246

 

Operating expenses:

 

 

 

 

Compensation and benefits

507

 

481

 

259

 

241

 

Professional services

62

 

59

 

29

 

29

 

Acquisition-related transaction and integration costs

1

 

27

 

1

 

15

 

Technology and communication

220

 

213

 

113

 

108

 

Rent and occupancy

35

 

33

 

18

 

16

 

Selling, general and administrative

83

 

72

 

41

 

39

 

Depreciation and amortization

315

 

281

 

157

 

143

 

Total operating expenses

1,223

 

1,166

 

618

 

591

 

Operating income

1,345

 

1,305

 

680

 

655

 

Other income (expense):

 

 

 

 

Interest income

19

 

9

 

10

 

5

 

Interest expense

(142

)

(107

)

(71

)

(55

)

Other income, net

32

 

21

 

9

 

6

 

Other income (expense), net

(91

)

(77

)

(52

)

(44

)

Income before income tax expense

1,254

 

1,228

 

628

 

611

 

Income tax expense

284

 

292

 

150

 

149

 

Net income

$

970

 

$

936

 

$

478

 

$

462

 

Net income attributable to non-controlling interest

(14

)

(17

)

(6

)

(7

)

Net income attributable to Intercontinental Exchange, Inc.

$

956

 

$

919

 

$

472

 

$

455

 

 

 

 

 

 

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

 

 

 

 

Basic

$

1.69

 

$

1.59

 

$

0.84

 

$

0.79

 

Diluted

$

1.68

 

$

1.58

 

$

0.84

 

$

0.78

 

Weighted average common shares outstanding:

 

 

 

 

Basic

565

 

580

 

563

 

578

 

Diluted

568

 

583

 

566

 

581

 

 

Consolidated Balance Sheets

(In millions)

(Unaudited)

 

 

As of

As of

 

June 30, 2019

December 31, 2018

Assets:

 

 

Current assets:

 

 

Cash and cash equivalents

$

837

 

$

724

 

Short-term restricted cash and cash equivalents

880

 

818

 

Customer accounts receivable, net

1,062

 

953

 

Margin deposits, guaranty funds and delivery contracts receivable

61,353

 

63,955

 

Prepaid expenses and other current assets

240

 

242

 

Total current assets

64,372

 

66,692

 

Property and equipment, net

1,525

 

1,241

 

Other non-current assets:

 

 

Goodwill

13,308

 

13,085

 

Other intangible assets, net

10,446

 

10,462

 

Long-term restricted cash and cash equivalents

354

 

330

 

Other non-current assets

925

 

981

 

Total other non-current assets

25,033

 

24,858

 

Total assets

$

90,930

 

$

92,791

 

 

 

 

Liabilities and Equity:

 

 

Current liabilities:

 

 

Accounts payable and accrued liabilities

$

518

 

$

521

 

Section 31 fees payable

167

 

105

 

Accrued salaries and benefits

177

 

280

 

Deferred revenue

360

 

135

 

Short-term debt

1,303

 

951

 

Margin deposits, guaranty funds and delivery contracts payable

61,353

 

63,955

 

Other current liabilities

253

 

161

 

Total current liabilities

64,131

 

66,108

 

Non-current liabilities:

 

 

Non-current deferred tax liability, net

2,296

 

2,337

 

Long-term debt

6,494

 

6,490

 

Accrued employee benefits

200

 

204

 

Non-current operating lease liability

298

 

 

Other non-current liabilities

293

 

350

 

Total non-current liabilities

9,581

 

9,381

 

Total liabilities

73,712

 

75,489

 

Commitments and contingencies

 

 

Redeemable non-controlling interest in consolidated subsidiaries

72

 

71

 

Equity:

 

 

Intercontinental Exchange, Inc. stockholders’ equity:

 

 

Common stock

6

 

6

 

Treasury stock, at cost

(3,194

)

(2,354

)

Additional paid-in capital

11,651

 

11,547

 

Retained earnings

8,961

 

8,317

 

Accumulated other comprehensive loss

(309

)

(315

)

Total Intercontinental Exchange, Inc. stockholders’ equity

17,115

 

17,201

 

Non-controlling interest in consolidated subsidiaries

31

 

30

 

Total equity

17,146

 

17,231

 

Total liabilities and equity

$

90,930

 

$

92,791

 

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 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)

 

 

Trading and Clearing Segment

 

Data and Listings Segment

 

Consolidated

 

Three Months Ended
June 30,

 

Three Months Ended
June 30,

 

Three Months Ended
June 30,

 

2019

2018

 

2019

2018

 

2019

2018

Total revenues, less transaction-based expenses

$634

$609

 

$664

$637

 

$1,298

$1,246

Total operating expenses

249

218

 

369

373

 

618

591

Less: Interactive Data integration costs

 

12

 

12

Less: Amortization of acquisition-related intangibles

23

15

 

55

53

 

78

68

Less: Impairment of exchange registration intangible assets on closure of ICE Futures Canada and ICE Clear Canada

4

 

 

4

Less: Employee severance costs related to ICE Futures Canada and ICE Clear Canada operations

4

 

 

4

Adjusted total operating expenses

$226

$195

 

$314

$308

 

$540

$503

Operating income

$385

$391

 

$295

$264

 

$680

$655

Adjusted operating income

$408

$414

 

$350

$329

 

$758

$743

Operating margin

61%

64%

 

44%

41%

 

52%

53%

Adjusted operating margin

64%

68%

 

53%

52%

 

58%

60%

 

Adjusted Net Income Attributable to ICE and EPS

(In millions)

(Unaudited)

 

 

Three Months Ended
June 30, 2019

Three Months Ended
June 30, 2018

Net income attributable to ICE

$

472

 

$

455

 

Add: Interactive Data integration costs

 

12

 

Add: Amortization of acquisition-related intangibles

78

 

68

 

Add: Impairment of exchange registration intangible assets on closure of ICE Futures Canada and ICE Clear Canada

 

4

 

Add: Employee severance costs related to ICE Futures Canada and ICE Clear Canada operations

 

4

 

Less: Income tax effect for the above items

(20

)

(23

)

Add: Deferred tax adjustments on acquisition-related intangibles

4

 

5

 

Adjusted net income attributable to ICE

$

534

 

$

525

 

 

 

 

Diluted earnings per share attributable to ICE

$

0.84

 

$

0.78

 

 

 

 

Adjusted diluted earnings per share attributable to ICE

$

0.94

 

$

0.90

 

 

Free Cash Flow Calculation

(In millions)

(Unaudited)

 

 

 

 

Six months ended
June 30, 2019

Six months ended
June 30, 2018

Cash flow from operations

$1,382

 

$1,236

 

Less: Capital expenditures and capitalized software development costs

(134

)

(108

)

Less: Section 31 fees, net

(63

)

(80

)

Free cash flow

$1,185

$1,048

About Intercontinental Exchange

Intercontinental Exchange (NYSE: ICE) is a Fortune 500 company formed in the year 2000 to modernize markets. ICE serves customers by operating the exchanges, clearing houses and information services they rely upon to invest, trade and manage risk across global financial and commodity markets. A leader in market data, ICE Data Services serves the information and connectivity needs across virtually all asset classes. As the parent company of the New York Stock Exchange, the company is the premier venue for raising capital in the world, driving economic growth and transforming markets.

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, 2018, as filed with the SEC on February 7, 2019. 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.

SOURCE: Intercontinental Exchange

ICE-CORP

ICE Investor Relations Contact:
Warren Gardiner
+1 770 835 0114
warren.gardiner@theice.com

investors@theice.com

ICE Media Contact:
Josh King
+1 212 656 2490
josh.king@theice.com

media@theice.com