10-QPeriod: Q1 FY2018

Intercontinental Exchange, Inc. Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 3, 2018For Securities:ICE

Summary

Intercontinental Exchange, Inc. (ICE) reported solid results for the first quarter of 2018, demonstrating resilience and strategic growth. Total revenues increased by 5% year-over-year to $1.58 billion, with revenues less transaction-based expenses growing 5% to $1.225 billion. This growth was driven by a robust performance in the Trading and Clearing segment, which saw an 11% increase in revenues less transaction-based expenses, and a steady performance in the Data and Listings segment. The company also successfully integrated the recently acquired BondPoint business and made a significant investment in Euroclear, positioning ICE for future expansion. Despite increased interest expenses related to commercial paper borrowings and a strategic acquisition, the company maintained strong operating income and margins. Net income attributable to ICE declined slightly to $464 million ($0.79 diluted EPS) compared to $503 million ($0.84 diluted EPS) in the prior year period, partly due to a large investment gain recognized in the prior year. However, on an adjusted basis, which excludes non-recurring items, adjusted net income and adjusted diluted EPS showed significant year-over-year increases, reflecting the company's core operational strength and efficient cost management. ICE also continued its commitment to shareholder returns through dividends and share repurchases.

Financial Highlights

52 data points
Beta

Revenue

$1.58B

Net Income

$464.00M

29.4% Net Margin

EPS (Diluted)

$0.79

Total Assets

$82.06B

Cash & Equivalents

$523.00M

Free Cash Flow

$559.00M

Financial Statements
Beta
Revenue$1.58B
SG&A Expenses$33.00M
Operating Expenses$575.00M
Operating Income$650.00M
Interest Expense$52.00M
Net Income$464.00M
EPS (Basic)$0.80
EPS (Diluted)$0.79
Shares Outstanding (Basic)582.00M
Shares Outstanding (Diluted)586.00M

Key Highlights

  • 1Total revenues increased by 5% to $1.58 billion, and revenues less transaction-based expenses grew by 5% to $1.225 billion compared to Q1 2017.
  • 2The Trading and Clearing segment showed strong performance with revenues less transaction-based expenses up 11% to $596 million, driven by higher volumes in cash equities, equity options, and CDS clearing.
  • 3The Data and Listings segment remained stable, with revenues of $629 million, supported by consistent performance in Data Services and a slight increase in Listings revenue.
  • 4ICE successfully closed the acquisition of BondPoint for $400 million in cash, integrating it into its Trading and Clearing segment to enhance its fixed income trading solutions.
  • 5The company made a significant investment in Euroclear, increasing its stake to 9.8% for a total investment of $631 million, strengthening its position in post-trade services.
  • 6Operating income increased by 12% to $650 million, and operating margin improved by 3 percentage points to 53%, demonstrating operational efficiency.
  • 7The company returned capital to shareholders through $140 million in dividends paid and $300 million in share repurchases during the quarter.

Frequently Asked Questions

The acquisition of BondPoint for $400 million in cash was completed in January 2018 and is primarily included in the Trading and Clearing segment. The financial statements reflect the results of BondPoint subsequent to the acquisition date. The acquisition contributed to an increase in 'Other revenues' and was funded by commercial paper borrowings and operational cash flow. This acquisition is expected to enhance ICE's electronic fixed income trading solutions.

ICE adopted ASC 606 on January 1, 2018, on a full retrospective basis. The adoption had a minimal impact on total revenues and net income for the periods presented. Primarily, it accelerated the recognition of a portion of original listing fees, which was partially offset by a deceleration in clearing fee revenues. The standard requires enhanced disclosures regarding revenue recognition, which ICE has provided.

The TCJA, enacted in December 2017, reduced the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018. This resulted in a lower effective tax rate of 23% for Q1 2018 compared to 30% in Q1 2017. While the lower corporate rate provided a benefit, it was partially offset by additional U.S. federal and state taxes on certain international income provisions of the TCJA. ICE is still finalizing its accounting for all TCJA impacts within the allowed measurement period.

ICE increased its stake in Euroclear to 9.8% by investing an additional $304 million in February 2018, bringing the total investment to $631 million. Euroclear is a leading provider of post-trade services. This investment, classified as an equity investment, is accounted for using a measurement alternative due to the lack of a readily determinable fair value. There were no fair value adjustments recognized in net income during the quarter. This strategic investment aims to enhance ICE's capabilities in the post-trade services market.