10-QPeriod: Q2 FY2018

Intercontinental Exchange, Inc. Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 2, 2018For Securities:ICE

Summary

Intercontinental Exchange, Inc. (ICE) reported solid financial performance for the six months and three months ended June 30, 2018. Revenues, less transaction-based expenses, showed a healthy increase, driven by growth in both the Trading and Clearing segment and the Data and Listings segment. Net income attributable to ICE remained stable year-over-year for the six-month period but saw an increase of 8% for the three-month period, reflecting strong operational execution and the benefits of a lower effective tax rate due to the Tax Cuts and Jobs Act of 2017. The company continued its strategic growth initiatives through acquisitions, notably the significant purchases of BondPoint and TMC Bonds, LLC, and the acquisition of CHX Holdings, Inc., all aimed at expanding its fixed income and exchange offerings. These acquisitions, along with ongoing investments in technology and capital expenditures, demonstrate ICE's commitment to expanding its market reach and service capabilities. The company also returned capital to shareholders through dividends and share repurchases, indicating financial strength and confidence in its future prospects.

Financial Highlights

52 data points
Beta

Revenue

$1.56B

Net Income

$455.00M

29.2% Net Margin

EPS (Diluted)

$0.78

Total Assets

$82.85B

Cash & Equivalents

$532.00M

Free Cash Flow

$644.00M

Financial Statements
Beta
Revenue$1.56B
SG&A Expenses$39.00M
Operating Expenses$591.00M
Operating Income$655.00M
Interest Expense$55.00M
Net Income$455.00M
EPS (Basic)$0.79
EPS (Diluted)$0.78
Shares Outstanding (Basic)578.00M
Shares Outstanding (Diluted)581.00M

Key Highlights

  • 1Total revenues, less transaction-based expenses, increased by 5% for the six months ended June 30, 2018, and by 6% for the three months ended June 30, 2018, compared to the prior year periods.
  • 2Net income attributable to Intercontinental Exchange, Inc. was $919 million for the six months ended June 30, 2018, a slight decrease from $922 million in the prior year, but increased by 8% to $455 million for the three months ended June 30, 2018.
  • 3The effective tax rate decreased to 24% for the six months and three months ended June 30, 2018, primarily due to the U.S. federal corporate income tax rate reduction from the Tax Cuts and Jobs Act.
  • 4Significant strategic acquisitions were made, including BondPoint for $400 million and TMC Bonds, LLC for $701 million, bolstering ICE's fixed income trading solutions.
  • 5Operating income grew by 10% for the six-month period and 7% for the three-month period, demonstrating strong operational leverage.
  • 6The company returned $759 million to shareholders through share repurchases and paid $279 million in dividends during the first six months of 2018.
  • 7Total debt increased to $6.916 billion as of June 30, 2018, primarily driven by commercial paper issuances to fund acquisitions and investments.

Frequently Asked Questions

Revenue growth was primarily driven by increases in both the Trading and Clearing segment and the Data and Listings segment. Specifically, transaction and clearing revenues saw an increase driven by higher volumes in energy futures and options, agricultural and metals futures, and interest rates and financial futures. Data services revenues remained strong due to customer retention and new customer additions.

The TCJA significantly lowered ICE's effective tax rate from 27% to 24% for the six-month period and from 25% to 24% for the three-month period, leading to higher net income. This was due to the reduction in the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018.

ICE has been actively pursuing strategic growth through acquisitions. Notably, they acquired BondPoint for $400 million and TMC Bonds, LLC for $701 million, both enhancing their electronic fixed income trading solutions. Additionally, ICE acquired CHX Holdings, Inc., the parent company of the Chicago Stock Exchange. The company also increased its stake in Euroclear to 9.8%.

ICE's total debt increased to $6.916 billion. The company utilizes its Commercial Paper Program, backed by a $3.4 billion revolving credit facility, for funding operations, acquisitions, and investments. They also continue to return capital to shareholders through dividends and share repurchases, supported by strong operating cash flows.