ATLANTA & NEW YORK--(BUSINESS WIRE)--Intercontinental Exchange (NYSE: ICE):
|■ Record second quarter revenues of $1.2 billion, +6% y/y||
Jeffrey C. Sprecher, Chairman & CEO, said,
“We are pleased to report our second quarter results, which extend our track record of execution and growth. We reported another quarter of record revenues and double-digit EPS growth, as strong results in our data and listings segment were complemented by double-digit revenue growth in our trading and clearing segment. As we continue to innovate, customer demand for our unique content, our secure distribution and our global benchmark contracts has never been stronger."
|■ GAAP Diluted EPS of $0.78, +10% y/y|
|■ Adj. Diluted EPS of $0.90, +18% y/y|
|■ Operating Margin of 53%, +1 pt. y/y; Adj. operating margin of 60%, +2 pts. y/y|
|■ Through 2Q18, over $1 billion returned to stockholders, +47% y/y|
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 2018. For the quarter ended June 30, 2018, consolidated net income attributable to ICE was $455 million on $1.2 billion of consolidated revenues less transaction-based expenses. Second quarter GAAP diluted earnings per share (EPS) were $0.78. Adjusted net income was $525 million in the second quarter and adjusted diluted EPS were $0.90, up 18% year-over-year. 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, organic data revenue and free cash flow.
Scott A. Hill, ICE CFO, added: "In the first half of 2018, we grew revenues, expanded margins and generated over $1.2 billion of operating cash flow. We returned over $1 billion of capital to stockholders in 2018 while also continuing to invest and position our business for future growth. As we look to the second half of the year, we are excited about the array of growth opportunities ahead and our ability to generate value for stockholders."
Second Quarter 2018 Business Highlights
$ (in millions)
|Data & Listings||$||637||41||%||52||%|
|Trading & Clearing||$||609||64||%||68||%|
Second quarter, consolidated net revenues were $1.2 billion, up 6% year-over-year. Data and listings revenues in the second quarter were $637 million and trading and clearing net revenues were $609 million. Consolidated operating expenses were $591 million for the second quarter of 2018. On an adjusted basis, consolidated operating expenses were $503 million. Consolidated operating income for the second quarter was $655 million and the operating margin was 53%. On an adjusted basis, consolidated operating income for the second quarter was $743 million and the adjusted operating margin was 60%.
Data and Listings Segment Results
Second quarter data and listings revenues were $637 million, including data revenues of $526 million, up 1% year-over-year, negatively impacted by the divestiture of Trayport in the fourth quarter of 2017, and listings revenues of $111 million, up 2% year-over-year, negatively impacted by the divestiture of NYSE Governance Services in the second quarter of 2017. On an organic, constant currency basis(1), segment revenues were up 4% with data revenues up 4% year-over-year and listings revenues up 5% year-over-year. Data and listings operating expenses were $373 million and on an adjusted basis, were $308 million in the second quarter. Segment operating income for the second quarter was $264 million and the operating margin was 41%. On an adjusted basis, operating income was $329 million and the adjusted operating margin was 52%.
|$ (in millions)||2Q18||% Chg||Organic||
|Pricing and Analytics||$||262||8||%||8||%||7||%|
|Desktops and Connectivity||120||(12||)%||3||%||2||%|
|(1)||Net revenues in constant currency are calculated holding both the pound sterling and euro at the average exchange rate from 2Q17, 1.2793 and 1.1004, respectively. References to organic growth excludes businesses that have been acquired, divested or discontinued that significantly impact the comparable periods. For 2Q18 and 2Q17, $10 million and $27 million of data revenues were excluded from organic growth, respectively, and $3 million of listings revenues were excluded from 2Q17.|
Trading and Clearing Segment Results
Second quarter trading and clearing net revenues were $609 million, up 11% from one year ago. Trading and clearing operating expenses were $218 million and adjusted operating expenses were $195 million in the second quarter. Segment operating income for the second quarter was $391 million and the operating margin was 64%. On an adjusted basis, operating income was $414 million and the adjusted operating margin was 68%.
|$ (in millions)||2Q18||% Chg|
|Ags & metals||74||20||%|
|Cash equities & equity options||79||6||%|
|OTC & other transaction(2)||57||26||%|
|(1)||Financials includes interest rates and other financial futures and options.|
|(2)||OTC & Other transaction includes physical energy, fixed income execution and CDS execution and clearing.|
|(3)||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 second quarter increased 8% year-over-year driven by a 11% increase in rate per contract (RPC), partially offset by a 5% decline in average daily volume (ADV).
- Ags and metals futures and options revenue in the second quarter increased 20% year-over-year driven by a 13% increase in ADV and 4% increase in RPC.
- Financials futures and options revenue in the second quarter increased 7% year-over-year driven by a 2% increase in ADV and a 5% increase in RPC.
- U.S. cash equities and equity options revenue in the second quarter increased 6% year-over-year driven by a 35% increase in equity options ADV and a 5% increase in U.S. Cash Equities RPC.
- OTC and other transaction revenues in the second quarter were up 26% year-over-year driven by a 19% increase in CDS clearing revenue in the second quarter and the addition of BondPoint.
|(lots in thousands)||RPC|
|2Q18||% Chg||2Q18||% Chg|
|Ags & metals||480||13||%||$||2.42||4||%|
|Total Futures & Options||6,123||—||$||1.06||9||%|
|The second quarter of 2018 included 64 trading days for commodities, other financials, cash equities and equity options and 64 trading days for interest rates. The second quarter of 2017 included 63 trading days for commodities, other financials, cash equities and equity options and 63 trading days for interest rates.|
- The effective tax rate for the second quarter was 24%.
- Through the second quarter, ICE repurchased approximately $759 million of its common stock and paid $279 million in dividends.
- Unrestricted cash was $532 million and outstanding debt was $6.9 billion as of June 30, 2018.
- Operating cash flow through the second quarter was $1.24 billion compared to $1.10 billion one year ago. Through the second quarter, free cash flow was $1.05 billion, up 17% from $898 million one year ago.
- ICE's third quarter 2018 data revenues are expected to be in a range of $530 million to $532 million.
- ICE's fourth quarter 2018 data revenues are expected to be in a range of $538 million to $542 million.
- ICE's third quarter 2018 GAAP operating expenses are expected to be in a range of $590 million to $600 million and adjusted operating expenses(1) are expected to be in a range of $520 million to $525 million.
- ICE's full year 2018 GAAP operating expenses are expected to be in a range of $2,355 million to $2,365 million and adjusted operating expenses(1) are expected to be in a range of $2,040 million to $2,050 million.
- ICE's interest expense is expected to be $67 million in the third quarter and $73 million in the fourth quarter.
- ICE's diluted share count for the third quarter is expected to be in the range of 575 million to 577 million weighted average shares outstanding and 577 million to 582 million for the full year, including only share repurchases completed through July 31, 2018.
|(1)||The 2018 Non-GAAP adjusted operating expense excludes $73 million in amortization of acquisition-related intangibles for the third quarter of 2018 and $283 million for the full year. The GAAP operating expense forecast does not reflect an estimate of acquisition-related transaction and integration costs for the third quarter of 2018.|
Earnings Conference Call Information
ICE will hold a conference call today, August 2, at 8:30 a.m. ET to review its second quarter 2018 financial results. A live audio webcast of the earnings call will be available on the company's website at www.theice.com in the investor relations section. Participants may also listen via telephone by dialing 888-317-6003 from the United States, 866-284-3684 from Canada or 412-317-6061 from outside of the United States and Canada. Telephone participants are required to provide the participant entry number 2600358 and are recommended to call 10 minutes prior to the start of the call. The call will be archived on the company's website for replay.
The conference call for the third quarter 2018 earnings has been scheduled for October 31, 2018 at 8:30 a.m. ET. Please refer to the Investor Relations website at www.ir.theice.com for additional information.
Historical futures, options and cash ADV, rate per contract, open interest data and CDS cleared information can be found at: http://ir.theice.com/investors-and-media/supplemental-volume-info/default.aspx
|Consolidated Statements of Income|
|(In millions, except per share amounts)|
|Six Months Ended||Three Months Ended|
|June 30,||June 30,|
|Transaction and clearing, net||$||1,762||$||1,615||$||864||$||817|
|Section 31 fees||211||183||90||92|
|Cash liquidity payments, routing and clearing||454||438||220||224|
|Total revenues, less transaction-based expenses||2,471||2,346||1,246||1,180|
|Compensation and benefits||481||483||241||236|
|Acquisition-related transaction and integration costs||27||23||15||9|
|Technology and communication||213||195||108||97|
|Rent and occupancy||33||35||16||17|
|Selling, general and administrative||72||79||39||38|
|Depreciation and amortization||281||276||143||142|
|Total operating expenses||1,166||1,155||591||571|
|Other income (expense):|
|Other income, net||30||191||11||3|
|Other income (expense), net||(77||)||101||(44||)||(42||)|
|Income before income tax expense||1,228||1,292||611||567|
|Income tax expense||292||354||149||140|
|Net income attributable to non-controlling interest||(17||)||(16||)||(7||)||(8||)|
|Net income attributable to Intercontinental Exchange, Inc.||$||919||$||922||$||455||$||419|
|Earnings per share attributable to Intercontinental Exchange, Inc. common stockholders:|
|Weighted average common shares outstanding:|
|Dividend per share||$||0.48||$||0.40||$||0.24||$||0.20|
|Consolidated Balance Sheets|
|As of||As of|
|June 30, 2018||December 31, 2017|
|Cash and cash equivalents||$||532||$||535|
|Short-term restricted cash and cash equivalents||817||769|
|Customer accounts receivable, net||1,049||903|
|Margin deposits, guaranty funds, and delivery contracts receivable||54,991||51,222|
|Prepaid expenses and other current assets||171||133|
|Total current assets||57,560||53,562|
|Property and equipment, net||1,220||1,246|
|Other non-current assets:|
|Other intangible assets, net||10,223||10,269|
|Long-term restricted cash and cash equivalents||331||264|
|Other non-current assets||1,029||707|
|Total other non-current assets||24,067||23,456|
|Liabilities and Equity:|
|Accounts payable and accrued liabilities||$||405||$||462|
|Section 31 fees payable||209||128|
|Accrued salaries and benefits||150||227|
|Margin deposits, guaranty funds, and delivery contracts payable||54,991||51,222|
|Other current liabilities||122||178|
|Total current liabilities||58,894||54,175|
|Non-current deferred tax liability, net||2,284||2,298|
|Accrued employee benefits||235||243|
|Other non-current liabilities||323||296|
|Total non-current liabilities||7,113||7,104|
|Intercontinental Exchange, Inc. stockholders’ equity:|
|Treasury stock, at cost||(1,911||)||(1,076||)|
|Additional paid-in capital||11,477||11,392|
|Accumulated other comprehensive loss||(265||)||(223||)|
|Total Intercontinental Exchange, Inc. stockholders’ equity||16,805||16,957|
|Non-controlling interest in consolidated subsidiaries||35||28|
|Total liabilities and equity||$||82,847||$||78,264|
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, organic data revenue 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
|Trading and Clearing||Data and Listings|
|Three Months Ended||Three Months Ended||Three Months Ended|
|June 30,||June 30,||June 30,|
|Total revenues, less transaction-based expenses||$||609||$||550||$||637||$||630||$||1,246||$||1,180|
|Total operating expenses||$||218||$||197||$||373||$||374||$||591||$||571|
|Less: Interactive Data transaction and integration costs||—||—||12||8||
|Less: Amortization of acquisition-related intangibles||15||16||53||51||68||67|
|Less: Impairment of exchange registration intangible assets on closure of ICE Futures Canada and ICE Clear Canada||4||—||—||—||4||—|
|Less: Impairment on divestiture of NYSE Governance Services||—||—||—||6||—||6|
|Less: Employee severance costs related to ICE Futures Canada and ICE Clear Canada operations||4||—||—||—||4||—|
|Adjusted total operating expenses||$||195||$||181||$||308||$||309||$||503||$||490|
|Adjusted operating income||$||414||$||369||$||329||$||321||$||743||$||690|
|Adjusted operating margin||68||%||67||%||52||%||51||%||60||%||58||%|
|Adjusted Net Income Attributable to ICE and EPS|
|Three Months||Three Months|
|Ended June||Ended June|
|30, 2018||30, 2017|
|Net income attributable to ICE||$||455||$||419|
|Add: Interactive Data transaction and integration costs||12||8|
|Add: Amortization of acquisition-related intangibles||68||67|
|Add: Impairment of exchange registration intangible assets on closure of ICE Futures Canada and ICE Clear Canada||4||—|
|Add: Employee severance costs related to ICE Futures Canada and ICE Clear Canada operations||4||—|
|Add: Impairment on divestiture of NYSE Governance Services||—||6|
|Add: Foreign exchange loss and transaction expenses on sale of Cetip||—||9|
|(Less): Income tax effect for the above items||(23||)||(60||)|
|Add: Deferred tax adjustment on acquisition-related intangibles||5||—|
|Adjusted net income attributable to ICE||$||525||$||449|
|Diluted earnings per share attributable to ICE||$||0.78||$||0.71|
|Adjusted diluted earnings per share attributable to ICE||$||0.90||$||0.76|
|GAAP to Organic Data Revenue|
|Data Revenue (as reported)||$||526||$||521|
|2017 Divestitures & wind down of acq. businesses(1)||—||(27||)|
|Organic Data Revenue||$||516||$||494|
|Organic, constant currency revenue||$||513||$||494|
|(1)||Includes $19 million of revenue related to the divestiture of Trayport in the fourth quarter of 2017 and $8 million of revenue related to the wind down of acquired business. Wind down of acquired businesses includes the discontinuation of certain businesses acquired as part of a larger acquisitions that are no longer strategic for the company. These include the anticipated 2018 erosion of legacy SPSE customers who can no longer use IDC & SPSE as their primary and secondary source of data and the impact of exiting certain non-strategic components of the legacy IDC 7-Ticks business.|
|(2)||Includes revenues from TMX, ICE BofAML, NGX and BondPoint.|
|(3)||Net revenues in constant currency are calculated holding both the pound sterling and euro at the average exchange rate from 2Q17, 1.2793 and 1.1004, respectively. For the three months ending June 30, 2018, 6% of our data revenues were billed in pounds sterling and 4% in euros. For the three months ending June 30, 2017, 9% of our data revenues were billed in pounds sterling and 3% in euros.|
|Free Cash Flow Calculation|
|Cash flow from operations||$||1,236||$||1,099|
|Less: Capital expenditures and capitalized software development costs||(108||)||(150||)|
|Less: Section 31 fees, net||(80||)||(51||)|
|Free cash flow||$||1,048||$||898|
About Intercontinental Exchange
Intercontinental Exchange (NYSE: ICE) is a Fortune 500 and Fortune Future 50 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 raises more capital than any other exchange 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, 2017, as filed with the SEC on February 7, 2018. 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