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Intercontinental Exchange Reports Strong Second Quarter 2020

Intercontinental Exchange (NYSE: ICE):

  • Second quarter revenues of $1.4 billion, +8% y/y
  • GAAP diluted EPS of $0.95, +13% y/y
  • Adj. diluted EPS of $1.07, +14% y/y
  • Operating margin of 53%; Adj. operating margin of 59%
  • Operating income +10% y/y; Adj. operating income +8% y/y
  • Through June 30, 2020, returned $1.4B to stockholders

Jeffrey C. Sprecher,
ICE Chairman & Chief Executive Officer, said,
“We are pleased to report our second quarter results, which were highlighted by continued revenue growth and double digit earnings per share growth. Amidst an uncertain economic backdrop, our strong second quarter performance underscored the mission critical nature of both our markets and our data services. Above all, as we look to the second half, we are grateful to all of our customers for their continued business, partnership and trust.”

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 2020. For the quarter ended June 30, 2020, consolidated net income attributable to ICE was $523 million on $1.4 billion of consolidated revenues, less transaction-based expenses. Second quarter GAAP diluted earnings per share (EPS) were $0.95. Adjusted net income attributable to ICE was $584 million in the second quarter and adjusted diluted EPS were $1.07. 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: “In the first half, we built on our track record of consistent revenue growth, expense discipline and earnings per share growth. This performance enabled us to return over $1.4 billion of capital to our stockholders through dividends and our stock repurchase program. As we turn to the second half, we are well positioned to achieve our growth objectives and are investing to strengthen our foundation for continued growth in the future.”

Second Quarter 2020 Business Highlights

$ in millions

Net Revenue

Op Margin

Adj Op Margin

Data & Listings

$685

46%

53%

Trading & Clearing

$710

60%

64%

Consolidated

$1,395

53%

59%

Second quarter consolidated net revenues were $1.4 billion, up 8% year-over-year. Data and listings revenues in the second quarter were $685 million and trading and clearing net revenues were $710 million. Consolidated operating expenses were $651 million for the second quarter of 2020. On an adjusted basis, consolidated operating expenses were $575 million. Consolidated operating income for the second quarter was $744 million and the operating margin was 53%. On an adjusted basis, consolidated operating income for the second quarter was $820 million and the adjusted operating margin was 59%.

Data and Listings Segment Results

Second quarter data and listings revenues were $685 million, including data revenues of $574 million and listings revenues of $111 million. On a constant currency basis(1), segment revenues were up 3% with data revenues up 4% year-over-year. Data and listings operating expenses were $369 million and on an adjusted basis, were $319 million in the second quarter. Segment operating income for the second quarter was $316 million and the operating margin was 46%. On an adjusted basis, operating income was $366 million and the adjusted operating margin was 53%.

$ in millions

2Q20

2Q19

% Chg

Const Curr(1)

Revenue:

Pricing and Analytics

$282

$270

4%

5%

Exchange Data and Feeds

183

180

2%

2%

Desktops and Connectivity

109

103

6%

6%

Data Total

574

553

4%

4%

Listings

111

111

Segment Revenue

$685

$664

3%

3%

(1) Net revenues in constant currency are calculated holding both the pound sterling and euro at the average exchange rate from 2Q19, 1.2851 and 1.1237, respectively.

Trading and Clearing Segment Results

Second quarter trading and clearing net revenues were $710 million, up 12% from one year ago. Trading and clearing operating expenses were $282 million and adjusted operating expenses were $256 million in the second quarter. Segment operating income for the second quarter was $428 million and the operating margin was 60%. On an adjusted basis, operating income was $454 million and the adjusted operating margin was 64%.

$ in millions

2Q20

2Q19

% Chg

Revenue, net:

Energy

$276

$255

8%

Ags & metals

59

72

(18)%

Financials(1)

76

78

(3)%

Cash equities & equity options

101

74

37%

Fixed income & credit(2)

111

80

38%

OTC & other transaction(3)

13

12

14%

Other revenue(4)

74

63

17%

Segment Revenue

$710

$634

12%

(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, technology development 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 14% increase in average daily volume (ADV), partially offset by a 5% decrease in rate per contract (RPC).
  • Ags and metals futures and options revenue in the second quarter decreased 18% year-over-year driven by an 18% decrease in ADV and partially offset by a 1% increase in RPC.
  • Financials futures and options revenue in the second quarter decreased 3% year-over-year reflecting a 13% decrease in ADV and partially offset by a 12% increase in RPC.
  • U.S. cash equities and equity options revenue in the second quarter increased 37% year-over-year reflecting a 61% increase in cash equities ADV and a 44% increase in equity options ADV.

ADV
(lots in thousands)

RPC

2Q20

% Chg

2Q20

% Chg

Energy

3,068

14%

$1.42

(5)%

Ags & metals

408

(18)%

$2.33

1%

Financials

2,069

(13)%

$0.58

12%

Interest Rates

1,628

(17)%

$0.37

3%

Other Financials

441

8%

$1.33

7%

Total Futures & Options

5,545

—%

$1.17

2%

Cash Equities (in millions)

2,782

61%

$0.046

—%

Equity Options

4,566

44%

$0.07

(39)%

The second quarter of 2020 included 63 trading days for commodities, other financials, interest rates and cash equities and equity options. The second quarter of 2019 included 63 trading days for commodities, other financials, interest rates and cash equities and equity options.

Other Matters

  • The effective tax rate for the second quarter of 2020 was 22%.
  • Operating cash flow through the second quarter of 2020 was $1.4 billion and free cash flow was $1.1 billion.
  • Unrestricted cash was $880 million and outstanding debt was $8.4 billion as of June 30, 2020.
  • Through the second quarter of 2020, ICE repurchased $1.1 billion of its common stock and paid $330 million in dividends.

Financial Guidance

  • ICE's third quarter 2020 data revenues are expected to be in a range of $575 million to $580 million.
  • ICE's third quarter 2020 GAAP operating expenses are expected to be in a range of $651 million to $661 million and adjusted operating expenses(1) are expected to be in a range of $580 million to $590 million.
  • ICE's full year 2020 GAAP operating expenses are expected to be in a range of $2.617 billion to $2.667 billion and adjusted operating expenses(1) are expected to be in a range of $2.320 billion to $2.370 billion.
  • ICE's third quarter 2020 non-operating expense(2) is expected to be in the range of $20 million to $25 million.
  • ICE's full year 2020 capital expenditures are expected to be in a range of $350 million to $370 million.
  • ICE's third quarter 2020 GAAP effective tax rate is expected to be in a range of 33% to 35% and adjusted effective tax rate(3) is expected to be in a range of 24% to 26%.
  • ICE's fourth quarter 2020 GAAP and adjusted effective tax rate(3) is expected to be in a range of 22% to 24%.
  • ICE's diluted share count for the third quarter is expected to be in the range of 542 million to 548 million weighted average shares outstanding.

(1) 2020 and 3Q20 non-GAAP operating expenses exclude amortization of acquisition-related intangibles. 2020 non-GAAP operating expenses also exclude acquisition-related success fees and accruals related to investigations and inquiries.

(2) Non-operating expense includes interest income, interest expense and net other income.

(3) 3Q20 and 4Q20 adjusted effective tax rate reflects the tax impact of any pre-tax income adjustments and excludes deferred tax impacts primarily related to tax law changes.

Earnings Conference Call Information

ICE will hold a conference call today, July 30, 2020, at 8:30 a.m. ET to review its second quarter 2020 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 3663321 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 2020 earnings has been scheduled for October 29, 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)

Six Months Ended
June 30,

Three Months Ended
June 30,

Revenues:

2020

2019

2020

2019

Transaction and clearing, net

$

2,571

$

1,769

$

1,207

$

907

Data services

1,138

1,099

574

553

Listings

223

222

111

111

Other revenues

149

127

74

63

Total revenues

4,081

3,217

1,966

1,634

Transaction-based expenses:

Section 31 fees

320

169

154

100

Cash liquidity payments, routing and clearing

807

480

417

236

Total revenues, less transaction-based expenses

2,954

2,568

1,395

1,298

Operating expenses:

Compensation and benefits

551

507

273

259

Professional services

63

62

34

29

Acquisition-related transaction and integration costs

14

1

2

1

Technology and communication

257

220

126

113

Rent and occupancy

40

35

19

18

Selling, general and administrative

89

83

40

41

Depreciation and amortization

314

315

157

157

Total operating expenses

1,328

1,223

651

618

Operating income

1,626

1,345

744

680

Other income (expense):

Interest income

8

19

2

10

Interest expense

(156)

(142)

(84)

(71)

Other income, net

31

32

11

9

Other income (expense), net

(117)

(91)

(71)

(52)

Income before income tax expense

1,509

1,254

673

628

Income tax expense

323

284

145

150

Net income

$

1,186

$

970

$

528

$

478

Net income attributable to non-controlling interest

(13)

(14)

(5)

(6)

Net income attributable to Intercontinental Exchange, Inc.

$

1,173

$

956

$

523

$

472

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

Basic

$

2.14

$

1.69

$

0.96

$

0.84

Diluted

$

2.13

$

1.68

$

0.95

$

0.84

Weighted average common shares outstanding:

Basic

549

565

546

563

Diluted

552

568

549

566

Consolidated Balance Sheets

(In millions)

(Unaudited)

As of

As of

June 30, 2020

December 31, 2019

Assets:

Current assets:

Cash and cash equivalents

$

880

$

841

Short-term restricted cash and cash equivalents

993

943

Customer accounts receivable, net

1,279

988

Margin deposits, guaranty funds and delivery contracts receivable

93,960

64,987

Prepaid expenses and other current assets

323

220

Total current assets

97,435

67,979

Property and equipment, net

1,510

1,536

Other non-current assets:

Goodwill

13,534

13,342

Other intangible assets, net

10,149

10,258

Long-term restricted cash and cash equivalents

408

404

Other non-current assets

1,024

974

Total other non-current assets

25,115

24,978

Total assets

$

124,060

$

94,493

Liabilities and Equity:

Current liabilities:

Accounts payable and accrued liabilities

$

520

$

505

Section 31 fees payable

316

138

Accrued salaries and benefits

199

291

Deferred revenue

383

129

Short-term debt

705

2,569

Margin deposits, guaranty funds and delivery contracts payable

93,960

64,987

Other current liabilities

110

197

Total current liabilities

96,193

68,816

Non-current liabilities:

Non-current deferred tax liability, net

2,317

2,314

Long-term debt

7,703

5,250

Accrued employee benefits

190

198

Non-current operating lease liability

274

281

Other non-current liabilities

294

270

Total non-current liabilities

10,778

8,313

Total liabilities

106,971

77,129

Commitments and contingencies

Redeemable non-controlling interest in consolidated subsidiaries

95

78

Equity:

Intercontinental Exchange, Inc. stockholders’ equity:

Common stock

6

6

Treasury stock, at cost

(5,050)

(3,879)

Additional paid-in capital

11,856

11,742

Retained earnings

10,462

9,629

Accumulated other comprehensive loss

(321)

(243)

Total Intercontinental Exchange, Inc. stockholders’ equity

16,953

17,255

Non-controlling interest in consolidated subsidiaries

41

31

Total equity

16,994

17,286

Total liabilities and equity

$

124,060

$

94,493

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

Six Months Ended June 30,

Six Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

2020

2019

Total revenues, less transaction-based expenses

$1,593

$1,247

$1,361

$1,321

$2,954

$2,568

Operating expenses

592

477

736

746

1,328

1,223

Less: Amortization of acquisition-related intangibles

51

46

90

109

141

155

Less: Acquisition-related success fee

10

— 

— 

— 

10

— 

Less: Accruals related to investigations and inquiries

— 

— 

5

— 

5

— 

Adjusted operating expenses

531

431

641

637

1,172

1,068

Operating income

1,001

770

625

575

1,626

1,345

Adjusted operating income

1,062

816

720

684

1,782

1,500

Operating margin

63 

%

62 

%

46 

%

44 

%

55 

%

52 

%

Adjusted operating margin

67 

%

65 

%

53 

%

52 

%

60 

%

58 

%

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,

2020

2019

2020

2019

2020

2019

Total revenues, less transaction-based expenses

$710

$634

$685

$664

$1,395

$1,298

Total operating expenses

282

249

369

369

651

618

Less: Amortization of acquisition-related intangibles

26

23

45

55

71

78

Less: Accruals related to investigations and inquiries

5

5

Adjusted total operating expenses

$256

$226

$319

$314

$575

$540

Operating income

$428

$385

$316

$295

$744

$680

Adjusted operating income

$454

$408

$366

$350

$820

$758

Operating margin

60

%

61

%

46

%

44

%

53

%

52

%

Adjusted operating margin

64

%

64

%

53

%

53

%

59

%

58

%

Adjusted Net Income Attributable to ICE and EPS

(In millions)

(Unaudited)

Six Months Ended June 30, 2020

Six Months Ended June 30, 2019

Net income attributable to ICE common stockholders

$

1,173

$

956

Add: Amortization of acquisition-related intangibles

141

155

Add: Extinguishment of 2020 Senior Notes

14

Add: Acquisition-related success fee

10

Add: Accruals related to investigations and inquiries

5

Add: Impairment of CAT promissory notes

2

Less: Income tax effect for the above items

(43)

(40)

Less: Deferred tax adjustments on acquisition-related intangibles

(10)

(13)

Add: Other tax adjustments

3

Adjusted net income attributable to ICE

$

1,292

$

1,061

Diluted earnings per share attributable to ICE

$

2.13

$

1.68

Adjusted diluted earnings per share attributable to ICE

$

2.34

$

1.87

Adjusted Net Income Attributable to ICE and EPS

(In millions)

(Unaudited)

Three Months Ended June 30, 2020

Three Months Ended June 30, 2019

Net income attributable to ICE

$

523

$

472

Add: Amortization of acquisition-related intangibles

71

78

Add: Extinguishment of 2020 Senior Notes

14

Add: Accruals related to investigations and inquiries

5

Add: Impairment of CAT promissory notes

2

Less: Income tax effect for the above items

(22)

(20)

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

(9)

4

Adjusted net income attributable to ICE

$

584

$

534

Diluted earnings per share attributable to ICE

$

0.95

$

0.84

Adjusted diluted earnings per share attributable to ICE

$

1.07

$

0.94

Free Cash Flow Calculation

(In millions)

(Unaudited)

Six months ended June 30, 2020

Six months ended June 30, 2019

Cash flow from operations

$1,378

$1,382

Less: Capital expenditures and capitalized software development costs

(144)

(134)

Less: Section 31 fees, net

(178)

(63)

Free cash flow

$1,056

$1,185

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, 2019, as filed with the SEC on February 6, 2020. 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
warren.gardiner@theice.com

investors@theice.com

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

media@theice.com

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