Intercontinental Exchange Reports Strong Second Quarter 2023

Intercontinental Exchange (NYSE: ICE):

  • 2Q23 net revenues of $1.9 billion, +4% y/y
  • 2Q23 GAAP diluted earnings per share (EPS) of $1.42, +43% y/y
  • 2Q23 adj. diluted earnings per share of $1.43, +8% y/y
  • 2Q23 operating income of $955 million, +10% y/y; adj. operating income of $1.1 billion, +5% y/y
  • 2Q23 operating margin of 51%; adj. operating margin of 60%

 

Jeffrey C. Sprecher,

ICE Chair & Chief Executive Officer, said,

"We are pleased to report our second quarter results, which were highlighted by another quarter of revenue and earnings per share growth. Amidst an uncertain macro environment, customers continue to access our networks to manage risk, consume data and drive workflow efficiencies. As we look to the second half of the year and beyond, we remain focused on driving innovation, helping to serve our customers' risk management needs and delivering value to our stockholders."

Intercontinental Exchange (NYSE: ICE), a leading global provider of data, technology and market infrastructure, today reported financial results for the second quarter of 2023. For the quarter ended June 30, 2023, consolidated net income attributable to ICE was $799 million on $1.9 billion of consolidated revenues, less transaction-based expenses. Second quarter GAAP diluted earnings per share was $1.42. Adjusted net income attributable to ICE was $802 million in the second quarter and adjusted diluted EPS was $1.43. 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: "Through the first half of the year, we have once again grown revenues, operating income, cash flow and earnings per share. This performance is a clear testament to the strength of our strategically diversified business model and to our ability to successfully execute amidst a dynamic macro economic environment. As we look to the second half of 2023, we are focused on strategically investing in future growth and creating value for our stockholders."

Second Quarter 2023 Business Highlights

Second quarter consolidated net revenues were $1.9 billion including exchange net revenues of $1.1 billion, fixed income and data services revenues of $546 million and mortgage technology revenues of $249 million. Consolidated operating expenses were $933 million for the second quarter of 2023. On an adjusted basis, consolidated operating expenses were $756 million. Consolidated operating income for the second quarter was $955 million and the operating margin was 51%. On an adjusted basis, consolidated operating income for the second quarter was $1.1 billion and the adjusted operating margin was 60%.

$ (in millions)

Net

Revenue

Op

Margin

Adj Op

Margin

 

2Q23

Exchanges

$1,093

72%

73%

Fixed Income and Data Services

$546

35%

43%

Mortgage Technology

$249

(7)%

40%

Consolidated

$1,888

51%

60%

 

 

 

 

 

2Q23

2Q22

% Chg

Recurring Revenue

$955

$930

2%

Transaction Revenue, net

$933

$884

6%

Exchanges Segment Results

Second quarter exchange net revenues were $1.1 billion. Exchange operating expenses were $311 million and on an adjusted basis, were $293 million in the second quarter. Segment operating income for the second quarter was $782 million and the operating margin was 72%. On an adjusted basis, operating income was $800 million and the adjusted operating margin was 73%.

$ (in millions)

2Q23

2Q22

% Chg

Const

Curr(1)

Revenue, net:

 

 

 

 

Energy

$355

$265

34%

33%

Ags and Metals

77

61

27%

27%

Financials(2)

104

123

(16)%

(16)%

Cash Equities and Equity Options

96

99

(3)%

(3)%

OTC and Other(3)

104

108

(3)%

(3)%

Data and Connectivity Services

231

218

6%

6%

Listings

126

131

(5)%

(5)%

Segment Revenue

$1,093

$1,005

9%

9%

 

 

 

 

 

Recurring Revenue

$357

$349

2%

2%

Transaction Revenue, net

$736

$656

12%

12%

(1) Net revenues in constant currency are calculated holding both the pound sterling and euro at the average exchange rate from 2Q22, 1.2568 and 1.0648, 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

Second quarter fixed income and data services revenues were $546 million. Fixed income and data services operating expenses were $356 million and adjusted operating expenses were $313 million in the second quarter. Segment operating income for the second quarter was $190 million and the operating margin was 35%. On an adjusted basis, operating income was $233 million and the adjusted operating margin was 43%.

$ (in millions)

2Q23

2Q22

% Chg

Const

Curr(1)

Revenue:

 

 

 

 

Fixed Income Execution

$28

$25

17%

17%

CDS Clearing

84

66

26%

25%

Fixed Income Data and Analytics

277

274

1%

1%

Other Data and Network Services

157

147

7%

7%

Segment Revenue

$546

$512

7%

6%

 

 

 

 

 

Recurring Revenue

$434

$421

3%

3%

Transaction Revenue

$112

$91

23%

23%

(1) Net revenues in constant currency are calculated holding both the pound sterling and euro at the average exchange rate from 2Q22, 1.2568 and 1.0648, respectively.

Mortgage Technology Segment Results

Second quarter mortgage technology revenues were $249 million. Mortgage technology operating expenses were $266 million and adjusted operating expenses were $150 million in the second quarter. Segment operating loss for the second quarter was $17 million and the operating margin was (7)%. On an adjusted basis, operating income was $99 million and the adjusted operating margin was 40%.

$ (in millions)

2Q23

2Q22

% Chg

Revenue:

 

 

 

Origination Technology

$170

$196

(13)%

Closing Solutions

47

66

(28)%

Data and Analytics

24

24

(5)%

Other

8

11

(32)%

Segment Revenue

$249

$297

(16)%

 

 

 

 

Recurring Revenue

$164

$160

2%

Transaction Revenue

$85

$137

(38)%

Other Matters

  • Operating cash flow through the second quarter of 2023 was $1.8 billion and adjusted free cash flow was $1.7 billion.
  • Unrestricted cash was $2.9 billion and outstanding debt was $18.1 billion as of June 30, 2023.
  • Through the second quarter of 2023, ICE paid $472 million in dividends.

Updated Financial Guidance

  • ICE's full year 2023 Mortgage Technology recurring revenue growth is now expected to be in the low-single digits.
  • ICE's full year 2023 GAAP operating expenses are expected to be in a range of $3.675 billion to $3.725 billion. Adjusted operating expenses(1) are now expected to be in a range of $3.04 billion to $3.06 billion.
  • ICE's third quarter 2023 GAAP operating expenses are expected to be in a range of $910 million to $920 million. Adjusted operating expenses(1) are expected to be in a range of $760 million to $770 million.
  • ICE's third quarter 2023 GAAP non-operating expense(2) is expected to be in the range of $80 million to $85 million. Adjusted non-operating expense is expected to be in the range of $70 million to $75 million.
  • ICE's diluted share count for the third quarter is expected to be in the range of 560 million to 564 million weighted average shares outstanding.

(1) 2023 and 3Q23 non-GAAP operating expenses exclude amortization of acquisition-related intangibles, pending Black Knight acquisition costs, Ellie Mae integration costs, and accruals related to regulatory settlements.

(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, August 3, 2023, at 8:30 a.m. ET to review its second 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 258641 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 2023 earnings has been scheduled for November 2nd, 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)

 

 

Six Months Ended

June 30,

Three Months Ended

June 30,

Revenues:

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Exchanges

$

3,214

 

$

3,247

 

$

1,541

 

$

1,604

 

Fixed income and data services

 

1,109

 

 

1,021

 

 

546

 

 

512

 

Mortgage technology

 

485

 

 

604

 

 

249

 

 

297

 

Total revenues

 

4,808

 

 

4,872

 

 

2,336

 

 

2,413

 

Transaction-based expenses:

 

 

 

 

Section 31 fees

 

175

 

 

174

 

 

56

 

 

123

 

Cash liquidity payments, routing and clearing

 

849

 

 

985

 

 

392

 

 

476

 

Total revenues, less transaction-based expenses

 

3,784

 

 

3,713

 

 

1,888

 

 

1,814

 

 

 

 

 

 

Operating expenses:

 

 

 

 

Compensation and benefits

 

703

 

 

714

 

 

351

 

 

355

 

Professional services

 

57

 

 

69

 

 

29

 

 

35

 

Acquisition-related transaction and integration costs

 

46

 

 

62

 

 

25

 

 

53

 

Technology and communication

 

345

 

 

344

 

 

173

 

 

169

 

Rent and occupancy

 

45

 

 

41

 

 

25

 

 

20

 

Selling, general and administrative

 

137

 

 

112

 

 

63

 

 

57

 

Depreciation and amortization

 

527

 

 

510

 

 

267

 

 

256

 

Total operating expenses

 

1,860

 

 

1,852

 

 

933

 

 

945

 

Operating income

 

1,924

 

 

1,861

 

 

955

 

 

869

 

Other income/(expense):

 

 

 

 

Interest income

 

193

 

 

9

 

 

102

 

 

8

 

Interest expense

 

(351

)

 

(264

)

 

(175

)

 

(161

)

Other income/(expense), net

 

(70

)

 

(35

)

 

(35

)

 

23

 

Total other income/(expense), net

 

(228

)

 

(290

)

 

(108

)

 

(130

)

Income before income tax expense

 

1,696

 

 

1,571

 

 

847

 

 

739

 

Income tax expense

 

207

 

 

338

 

 

32

 

 

173

 

Net income

$

1,489

 

$

1,233

 

$

815

 

$

566

 

Net income attributable to non-controlling interest

 

(35

)

 

(21

)

 

(16

)

 

(11

)

Net income attributable to Intercontinental Exchange, Inc.

$

1,454

 

$

1,212

 

$

799

 

$

555

 

 

 

 

 

 

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

 

 

 

 

Basic

$

2.60

 

$

2.17

 

$

1.43

 

$

0.99

 

Diluted

$

2.59

 

$

2.16

 

$

1.42

 

$

0.99

 

Weighted average common shares outstanding:

 

 

 

 

Basic

 

560

 

 

560

 

 

560

 

 

558

 

Diluted

 

561

 

 

562

 

 

561

 

 

560

 

 

Consolidated Balance Sheets

(In millions)

 

 

As of

 

 

June 30, 2023

As of

 

(Unaudited)

December 31, 2022

Assets:

 

 

Current assets:

 

 

Cash and cash equivalents

$

2,877

 

$

1,799

 

Short-term restricted cash and cash equivalents

 

5,413

 

 

6,149

 

Restricted short-term investments

 

735

 

 

 

Cash and cash equivalent margin deposits and guaranty funds

 

86,917

 

 

141,990

 

Invested deposits, delivery contracts receivable and unsettled variation margin

 

1,412

 

 

5,382

 

Customer accounts receivable, net

 

1,313

 

 

1,169

 

Prepaid expenses and other current assets

 

555

 

 

458

 

Total current assets

 

99,222

 

 

156,947

 

Property and equipment, net

 

1,718

 

 

1,767

 

Other non-current assets:

 

 

Goodwill

 

21,134

 

 

21,111

 

Other intangible assets, net

 

12,814

 

 

13,090

 

Long-term restricted cash and cash equivalents

 

205

 

 

405

 

Long-term restricted investments

 

199

 

 

 

Other non-current assets

 

991

 

 

1,018

 

Total other non-current assets

 

35,343

 

 

35,624

 

Total assets

$

136,283

 

$

194,338

 

 

 

 

Liabilities and Equity:

 

 

Current liabilities:

 

 

Accounts payable and accrued liabilities

$

919

 

$

866

 

Section 31 fees payable

 

173

 

 

223

 

Accrued salaries and benefits

 

226

 

 

352

 

Deferred revenue

 

437

 

 

170

 

Short-term debt

 

 

 

4

 

Margin deposits and guaranty funds

 

86,917

 

 

141,990

 

Invested deposits, delivery contracts payable and unsettled variation margin

 

1,412

 

 

5,382

 

Other current liabilities

 

120

 

 

184

 

Total current liabilities

 

90,204

 

 

149,171

 

Non-current liabilities:

 

 

Non-current deferred tax liability, net

 

3,256

 

 

3,493

 

Long-term debt

 

18,128

 

 

18,118

 

Accrued employee benefits

 

156

 

 

160

 

Non-current operating lease liability

 

218

 

 

254

 

Other non-current liabilities

 

432

 

 

381

 

Total non-current liabilities

 

22,190

 

 

22,406

 

Total liabilities

 

112,394

 

 

171,577

 

 

 

 

Equity:

 

 

Intercontinental Exchange, Inc. stockholders’ equity:

 

 

Common stock

 

6

 

 

6

 

Treasury stock, at cost

 

(6,276

)

 

(6,225

)

Additional paid-in capital

 

14,449

 

 

14,313

 

Retained earnings

 

15,925

 

 

14,943

 

Accumulated other comprehensive loss

 

(284

)

 

(331

)

Total Intercontinental Exchange, Inc. stockholders’ equity

 

23,820

 

 

22,706

 

Non-controlling interest in consolidated subsidiaries

 

69

 

 

55

 

Total equity

 

23,889

 

 

22,761

 

Total liabilities and equity

$

136,283

 

$

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

 

Six Months

Ended

June 30,

 

Six Months

Ended

June 30,

 

Six Months

Ended

June 30,

 

Six Months

Ended

June 30,

 

2023

 

2022

 

2023

 

2022

 

2023

 

2022

 

2023

 

2022

Total revenues, less transaction-based expenses

$2,190

 

$2,088

 

$1,109

 

$1,021

 

$485

 

$604

 

$3,784

 

$3,713

Operating expenses

631

 

603

 

699

 

692

 

530

 

557

 

1,860

 

1,852

Less: Amortization of acquisition-related intangibles

33

 

33

 

85

 

93

 

183

 

180

 

301

 

306

Less: Transaction and integration costs

 

 

 

 

46

 

60

 

46

 

60

Less: Other

17

 

 

 

 

 

 

17

 

Adjusted operating expenses

$581

 

$570

 

$614

 

$599

 

$301

 

$317

 

$1,496

 

$1,486

Operating income/(loss)

$1,559

 

$1,485

 

$410

 

$329

 

$(45)

 

$47

 

$1,924

 

$1,861

Adjusted operating income

$1,609

 

$1,518

 

$495

 

$422

 

$184

 

$287

 

$2,288

 

$2,227

Operating margin

71%

 

71%

 

37%

 

32%

 

(9)%

 

8%

 

51%

 

50%

Adjusted operating margin

73%

 

73%

 

45%

 

41%

 

38%

 

47%

 

60%

 

60%

 

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

June 30,

 

Three Months

Ended

June 30,

 

Three Months

Ended

June 30,

 

Three Months

Ended

June 30,

 

2023

 

2022

 

2023

 

2022

 

2023

 

2022

 

2023

 

2022

Total revenues, less transaction-based expenses

$1,093

 

$1,005

 

$546

 

$512

 

$249

 

$297

 

$1,888

 

$1,814

Operating expenses

311

 

304

 

356

 

338

 

266

 

303

 

933

 

945

Less: Amortization of acquisition-related intangibles

17

 

17

 

43

 

44

 

91

 

92

 

151

 

153

Less: Transaction and integration costs

 

 

 

 

25

 

52

 

25

 

52

Less: Other

1

 

 

 

 

 

 

1

 

Adjusted operating expenses

$293

 

$287

 

$313

 

$294

 

$150

 

$159

 

$756

 

$740

Operating income/(loss)

$782

 

$701

 

$190

 

$174

 

$(17)

 

$(6)

 

$955

 

$869

Adjusted operating income

$800

 

$718

 

$233

 

$218

 

$99

 

$138

 

$1,132

 

$1,074

Operating margin

72%

 

70%

 

35%

 

34%

 

(7)%

 

(2)%

 

51%

 

48%

Adjusted operating margin

73%

 

71%

 

43%

 

43%

 

40%

 

46%

 

60%

 

59%

 

Adjusted Net Income Attributable to ICE and Diluted EPS

(In millions)

(Unaudited)

 

 

Six Months

Ended June 30,

2023

 

Six Months

Ended June 30,

2022

Net income attributable to ICE

$

1,454

 

 

$

1,212

 

Add: Amortization of acquisition-related intangibles

 

301

 

 

 

306

 

Add: Transaction and integration costs

 

46

 

 

 

60

 

Add/(Less): Net interest (income)/expense on pre-acquisition-related debt and debt extinguishment

 

(12

)

 

 

48

 

Less: Gain on sale of Euroclear equity investment and dividends received

 

 

 

 

(41

)

Add: Net losses from unconsolidated investees

 

65

 

 

 

57

 

Add: Other

 

17

 

 

 

9

 

Less: Income tax effect for the above items

 

(112

)

 

 

(123

)

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

 

(85

)

 

 

15

 

Less: Other tax adjustments

 

(81

)

 

 

 

Adjusted net income attributable to ICE

$

1,593

 

 

$

1,543

 

 

 

 

 

Diluted earnings per share

$

2.59

 

 

$

2.16

 

 

 

 

 

Adjusted diluted earnings per share

$

2.84

 

 

$

2.75

 

 

 

 

 

Diluted weighted average common shares outstanding

 

561

 

 

 

562

 

 

Adjusted Net Income Attributable to ICE and Diluted EPS

(In millions)

(Unaudited)

 

 

Three Months

Ended June 30,

2023

 

Three Months

Ended June 30,

2022

Net income attributable to ICE

$

799

 

 

$

555

 

Add: Amortization of acquisition-related intangibles

 

151

 

 

 

153

 

Add: Transaction and integration costs

 

25

 

 

 

52

 

Add/(Less): Net interest (income)/expense on pre-acquisition-related debt and debt extinguishment

 

(6

)

 

 

48

 

Less: Gain on sale of Euroclear equity investment and dividends received

 

 

 

 

(41

)

Add: Net losses from unconsolidated investees

 

30

 

 

 

15

 

Add: Other

 

1

 

 

 

 

Less: Income tax effect for the above items

 

(55

)

 

 

(65

)

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

 

(86

)

 

 

22

 

Less: Other tax adjustments

 

(57

)

 

 

 

Adjusted net income attributable to ICE

$

802

 

 

$

739

 

 

 

 

 

Diluted earnings per share

$

1.42

 

 

$

0.99

 

 

 

 

 

Adjusted diluted earnings per share

$

1.43

 

 

$

1.32

 

 

 

 

 

Diluted weighted average common shares outstanding

 

561

 

 

 

560

 

 

Adjusted Free Cash Flow Calculation

(In millions)

(Unaudited)

 

 

Six Months Ended

June 30, 2023

Six Months Ended

June 30, 2022

Net cash provided by operating activities

$1,805

 

$1,725

 

Less: Capital expenditures

(61

)

(70

)

Less: Capitalized software development costs

(142

)

(134

)

Free cash flow

1,602

 

1,521

 

Add/(Less): Section 31 fees, net

50

 

(115

)

Adjusted free cash flow

$1,652

 

$1,406

 

 

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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