Intercontinental Exchange Reports Third Quarter 2019

Intercontinental Exchange Reports Third Quarter 2019

ATLANTA & NEW YORK–(BUSINESS WIRE)–Intercontinental Exchange (NYSE: ICE):

Record third quarter revenues of $1.3 billion, +11% y/y

GAAP diluted EPS of $0.94, +19% y/y

Adj. diluted EPS of $1.06, +25% y/y

Operating margin of 53%; Adj. operating margin of 59%

Operating income +17% y/y; Adj. operating income +16% y/y

Through September 30, 2019, returned nearly $1.6B to stockholders

 

 

Jeffrey C. Sprecher,ICE Chairman & Chief Executive Officer, said,“In the third quarter we generated record revenues and double-digit earnings-per-share growth. The combined strength of our futures business with compounding growth in our subscription-based Data & Listings business reflects our long-standing strategy of bringing transparency to global markets and enhancing customer workflows. As we look to 2020 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 operator of global exchanges and clearing houses and provider of data and listing services, today reported financial results for the third quarter of 2019. For the quarter ended September 30, 2019, consolidated net income attributable to ICE was $529 million on $1.3 billion of consolidated revenues, less transaction-based expenses. Third quarter GAAP diluted earnings per share (EPS) were $0.94. Adjusted net income attributable to ICE was $599 million in the third quarter and adjusted diluted EPS were $1.06. 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.

Scott A. Hill, ICE Chief Financial Officer, added: “During 2019 we’ve generated record revenues, operating income, earnings-per-share and cash flows. This performance enabled us to return a record $1.6 billion to stockholders while we continued to invest in strategic growth initiatives and product innovation. We remain focused on extending our track record of innovation and execution.”

 

Third Quarter 2019 Business Highlights

$ in millions

Net
Revenue

Op
Margin

Adj Op
Margin

 

 

 

 

Data & Listings

$667

44%

52%

Trading & Clearing

$669

62%

65%

Consolidated

$1,336

53%

59%

Third quarter consolidated net revenues were $1.3 billion, up 11% year-over-year. Data and listings revenues in the third quarter were $667 million and trading and clearing net revenues were $669 million. Consolidated operating expenses were $630 million for the third quarter of 2019. On an adjusted basis, consolidated operating expenses were $551 million. Consolidated operating income for the third quarter was $706 million and the operating margin was 53%. On an adjusted basis, consolidated operating income for the third quarter was $785 million and the adjusted operating margin was 59%.

Data and Listings Segment Results

Third quarter data and listings revenues were $667 million, including data revenues of $553 million, up 4% year-over-year, and listings revenues of $114 million, up 2% year-over-year. On a constant currency basis(1), segment revenues were up 4% with data revenues up 5% year-over-year and listings revenues up 2% year-over-year. Data and listings operating expenses were $375 million and on an adjusted basis, were $320 million in the third quarter. Segment operating income for the third quarter was $292 million and the operating margin was 44%. On an adjusted basis, operating income was $347 million and the adjusted operating margin was 52%.

$ in millions

3Q19

3Q18

% Chg

Const
Curr(1)

Revenue:

 

 

 

 

Pricing and Analytics

$273

$263

4%

5%

Exchange Data and Feeds

172

168

3%

3%

Desktops and Connectivity

108

99

9%

10%

Data Total

553

530

4%

5%

Listings

114

112

2%

2%

Segment Revenue

$667

$642

4%

4%

(1) Net revenues in constant currency are calculated holding both the pound sterling and euro at the average exchange rate from 3Q18, 1.3037 and 1.1631, respectively.

Trading and Clearing Segment Results

Third quarter trading and clearing net revenues were $669 million, up 20% from one year ago. Trading and clearing operating expenses were $255 million and adjusted operating expenses were $231 million in the third quarter. Segment operating income for the third quarter was $414 million and the operating margin was 62%. On an adjusted basis, operating income was $438 million and the adjusted operating margin was 65%.

$ in millions

3Q19

3Q18

% Chg

Revenue, net:

 

 

 

Energy

$265

$223

19%

Ags & metals

60

58

4%

Financials(1)

91

77

18%

Cash equities & equity options

74

72

5%

Fixed income & credit(2)

101

56

81%

OTC & other transaction(3)

11

11

(3)%

Other revenue(4)

67

61

9%

Segment Revenue

$669

$558

20%

(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.

Energy futures and options revenue in the third quarter increased 19% year-over-year driven by a 12% increase in average daily volume (ADV) and a 4% increase in rate per contract (RPC).

Ags and metals futures and options revenue in the third quarter increased 4% year-over-year driven by a 5% increase in ADV, partially offset by a 3% decrease in RPC.

Financials futures and options revenue in the third quarter increased 18% year-over-year reflecting a 13% increase in ADV and a 3% increase in RPC.

U.S. cash equities and equity options revenue in the third quarter increased 5% year-over-year reflecting a 10% increase in cash equities ADV.

 

ADV

(lots in thousands)

RPC

 

3Q19

% Chg

3Q19

% Chg

Energy

2,762

12%

$1.50

4%

Ags & metals

414

5%

$2.27

(3)%

Financials

2,650

13%

$0.52

3%

Interest Rates

2,205

13%

$0.38

(2)%

Other Financials

445

17%

$1.22

9%

Total Futures & Options

5,826

12%

$1.10

2%

 

 

 

 

 

Cash Equities (in millions)

1,665

10%

$0.049

—%

Equity Options

3,062

—%

$0.12

(5)%

The third quarter of 2019 included 64 trading days for commodities, other financials and cash equities and equity options and 66 days for interest rates. The third quarter of 2018 included 63 trading days for commodities, other financials and cash equities and equity options and 65 days for interest rates.

Other Matters

The effective tax rate for the third quarter of 2019 was 16%.

Operating cash flow through the third quarter was $1.9 billion, up from $1.7 billion one year ago. Through the third quarter of 2019, free cash flow was $1.7 billion.

Unrestricted cash was $655 million and outstanding debt was $7.8 billion as of September 30, 2019.

Through the third quarter of 2019, ICE repurchased $1.1 billion of its common stock and paid $467 million in dividends.

Financial Guidance

ICE’s fourth quarter 2019 GAAP operating expenses are expected to be in a range of $637 millionto $647 million and adjusted operating expenses(1) are expected to be in a range of $562 million to $572 million.

ICE’s fourth quarter 2019 data revenues are expected to be in a range of $555 million to $560 million.

ICE’s interest expense is expected to be $71 million in the fourth quarter.

ICE’s fourth quarter effective tax rate(2) is expected to be in the range of 21.5% to 23.5%.

ICE’s diluted share count for the fourth quarter is expected to be in the range of 557 million to 563 million weighted average shares outstanding.

(1) The 2019 Non-GAAP adjusted operating expense excludes $75 million in amortization of acquisition-related intangibles for the fourth quarter of 2019. The GAAP operating expense forecast does not reflect an estimate of acquisition-related transaction and integration costs for the fourth quarter of 2019.

(2) This represents fourth quarter 2019 guidance for both the GAAP and non-GAAP effective tax rates but note that the GAAP effective tax rate is more susceptible to diverging from this guidance based on items outside the normal course of business that are adjusted for to derive our non-GAAP results. Such items can be unknown, unpredictable or uncertain, requiring unreasonable efforts to determine with any precision and which could potentially be confusing or misleading.

Earnings Conference Call Information

ICE will hold a conference call today, October 31, 2019, at 8:30 a.m. ET to review its third 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 0423975 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 fourth quarter 2019 earnings has been scheduled for February 6, 2020 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)

 

Nine Months Ended
September 30,

Three Months Ended
September 30,

Revenues:

2019

2018

2019

2018

Transaction and clearing, net

$

2,698

 

$

2,522

 

$

929

 

$

760

 

Data services

1,652

 

1,576

 

553

 

530

 

Listings

336

 

332

 

114

 

112

 

Other revenues

194

 

169

 

67

 

61

 

Total revenues

4,880

 

4,599

 

1,663

 

1,463

 

Transaction-based expenses:

 

 

 

 

Section 31 fees

274

 

272

 

105

 

61

 

Cash liquidity payments, routing and clearing

702

 

656

 

222

 

202

 

Total revenues, less transaction-based expenses

3,904

 

3,671

 

1,336

 

1,200

 

Operating expenses:

 

 

 

 

Compensation and benefits

768

 

732

 

261

 

251

 

Professional services

97

 

91

 

35

 

32

 

Acquisition-related transaction and integration costs

1

 

33

 

 

6

 

Technology and communication

346

 

320

 

126

 

107

 

Rent and occupancy

52

 

50

 

17

 

17

 

Selling, general and administrative

116

 

109

 

33

 

37

 

Depreciation and amortization

473

 

429

 

158

 

148

 

Total operating expenses

1,853

 

1,764

 

630

 

598

 

Operating income

2,051

 

1,907

 

706

 

602

 

Other income (expense):

 

 

 

 

Interest income

27

 

15

 

8

 

6

 

Interest expense

(214

)

(173

)

(72

)

(66

)

Other income, net

30

 

33

 

(2

)

12

 

Other income (expense), net

(157

)

(125

)

(66

)

(48

)

Income before income tax expense

1,894

 

1,782

 

640

 

554

 

Income tax expense

387

 

381

 

103

 

89

 

Net income

$

1,507

 

$

1,401

 

$

537

 

$

465

 

Net income attributable to non-controlling interest

(22

)

(24

)

(8

)

(7

)

Net income attributable to Intercontinental Exchange, Inc.

$

1,485

 

$

1,377

 

$

529

 

$

458

 

 

 

 

 

 

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

 

 

 

 

Basic

$

2.64

 

$

2.39

 

$

0.95

 

$

0.80

 

Diluted

$

2.62

 

$

2.37

 

$

0.94

 

$

0.79

 

Weighted average common shares outstanding:

 

 

 

 

Basic

563

 

577

 

559

 

572

 

Diluted

566

 

581

 

563

 

576

 

 

 

Consolidated Balance Sheets

(In millions)

(Unaudited)

 

As of

As of

 

September 30, 2019

December 31, 2018

Assets:

 

 

Current assets:

 

 

Cash and cash equivalents

$

655

 

$

724

 

Short-term restricted cash and cash equivalents

945

 

818

 

Customer accounts receivable, net

1,056

 

953

 

Margin deposits, guaranty funds and delivery contracts receivable

65,988

 

63,955

 

Prepaid expenses and other current assets

227

 

242

 

Total current assets

68,871

 

66,692

 

Property and equipment, net

1,505

 

1,241

 

Other non-current assets:

 

 

Goodwill

13,310

 

13,085

 

Other intangible assets, net

10,330

 

10,462

 

Long-term restricted cash and cash equivalents

389

 

330

 

Other non-current assets

934

 

981

 

Total other non-current assets

24,963

 

24,858

 

Total assets

$

95,339

 

$

92,791

 

 

 

 

Liabilities and Equity:

 

 

Current liabilities:

 

 

Accounts payable and accrued liabilities

$

543

 

$

521

 

Section 31 fees payable

34

 

105

 

Accrued salaries and benefits

228

 

280

 

Deferred revenue

247

 

135

 

Short-term debt

1,329

 

951

 

Margin deposits, guaranty funds and delivery contracts payable

65,988

 

63,955

 

Other current liabilities

165

 

161

 

Total current liabilities

68,534

 

66,108

 

Non-current liabilities:

 

 

Non-current deferred tax liability, net

2,281

 

2,337

 

Long-term debt

6,496

 

6,490

 

Accrued employee benefits

197

 

204

 

Non-current operating lease liability

287

 

 

Other non-current liabilities

287

 

350

 

Total non-current liabilities

9,548

 

9,381

 

Total liabilities

78,082

 

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

(3,538

)

(2,354

)

Additional paid-in capital

11,706

 

11,547

 

Retained earnings

9,335

 

8,317

 

Accumulated other comprehensive loss

(348

)

(315

)

Total Intercontinental Exchange, Inc. stockholders’ equity

17,161

 

17,201

 

Non-controlling interest in consolidated subsidiaries

24

 

30

 

Total equity

17,185

 

17,231

 

Total liabilities and equity

$

95,339

 

$

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
September 30,

 

Three Months
Ended September 30,

 

Three Months Ended
September 30,

 

2019

 

2018

 

 

2019

 

2018

 

 

2019

 

2018

 

Total revenues, less transaction-based expenses

$669

$558

 

$667

$642

 

$1,336

$1,200

Total operating expenses

255

230

 

375

368

 

630

598

Less: Acquisition-related success fees

5

 

 

5

Less: Amortization of acquisition-related intangibles

24

19

 

55

53

 

79

72

Adjusted total operating expenses

$231

$206

 

$320

$315

 

$551

$521

Operating income

$414

$328

 

$292

$274

 

$706

$602

Adjusted operating income

$438

$352

 

$347

$327

 

$785

$679

Operating margin

62%

59%

 

44%

43%

 

53%

50%

Adjusted operating margin

65%

63%

 

52%

51%

 

59%

57%

 

Adjusted Net Income Attributable to ICE and EPS

(In millions)

(Unaudited)

 

Three Months Ended
September 30, 2019

Three Months Ended
September 30, 2018

Net income attributable to ICE

$

529

 

$

458

 

Add: Acquisition-related success fees

 

5

 

Add: Amortization of acquisition-related intangibles

79

 

72

 

Add: Impairment of CAT promissory notes

16

 

 

Less: Income tax effect for the above items

(25

)

(19

)

Less: Deferred tax adjustment from U.S. tax rate reduction

 

(12

)

Less: Other tax adjustments

 

(13

)

Adjusted net income attributable to ICE

$

599

 

$

491

 

 

 

 

Diluted earnings per share attributable to ICE

$

0.94

 

$

0.79

 

 

 

 

Adjusted diluted earnings per share attributable to ICE

$

1.06

 

$

0.85

 

 

Free Cash Flow Calculation

(In millions)

(Unaudited)

 

Nine months ended
September 30, 2019

Nine months ended
September 30, 2018

Cash flow from operations

$1,882

$1,735

Less: Capital expenditures and capitalized software development costs

(203)

(161)

Add: Section 31 fees, net

70

117

Free cash flow

$1,749

$1,691

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
Contacts
ICE Investor Relations Contact:
Warren Gardiner
+1 770 835 0114
[email protected]

[email protected]

ICE Media Contact:
Josh King
+1 212 656 2490
[email protected]

[email protected]

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