10-QPeriod: Q3 FY2022

Intercontinental Exchange, Inc. Quarterly Report for Q3 Ended Sep 30, 2022

Filed November 3, 2022For Securities:ICE

Summary

Intercontinental Exchange, Inc. (ICE) reported its third-quarter 2022 financial results, showcasing resilience and strategic advancements despite a dynamic market environment. Total revenues, less transaction-based expenses, saw a modest increase of 1% year-over-year to $1.81 billion for the quarter, and a 4% increase to $5.52 billion for the nine-month period. The company's diversified business segments, including Exchanges and Fixed Income & Data Services, demonstrated continued strength, while the Mortgage Technology segment experienced a revenue decline attributed to prevailing interest rate conditions. Financially, ICE reported a net loss of $175 million ($0.34 diluted loss per share) for the third quarter, a significant decrease from a net income of $637 million ($1.12 diluted earnings per share) in the prior year's quarter. This was largely influenced by a substantial increase in 'Other income/(expense), net,' primarily due to significant losses from equity method investments, notably Bakkt. However, on an adjusted basis, which excludes these non-core items, adjusted net income increased by 3% to $733 million and adjusted diluted earnings per share grew by 4% to $1.31 for the quarter, reflecting the underlying operational performance. The company also provided an update on its pending acquisition of Black Knight, Inc., expected to close in the first half of 2023, and continued its capital return program through share repurchases and dividends.

Financial Highlights

53 data points
Beta

Revenue

$2.39B

Net Income

-$191.00M

-8.0% Net Margin

EPS (Diluted)

$-0.34

Total Assets

$211.29B

Cash & Equivalents

$1.18B

Free Cash Flow

$682.00M

Financial Statements
Beta
Revenue$2.39B
SG&A Expenses$54.00M
Operating Expenses$898.00M
Operating Income$913.00M
Interest Expense$176.00M
Net Income-$191.00M
EPS (Basic)$-0.34
EPS (Diluted)$-0.34
Shares Outstanding (Basic)558.00M
Shares Outstanding (Diluted)560.00M

Key Highlights

  • 1For the third quarter of 2022, total revenues less transaction-based expenses increased by 1% to $1.81 billion, while for the nine-month period, it increased by 4% to $5.52 billion.
  • 2The company reported a net loss of $175 million for Q3 2022, impacted by significant losses from equity method investments, primarily Bakkt.
  • 3Adjusted net income for Q3 2022 increased by 3% to $733 million, and adjusted diluted EPS rose by 4% to $1.31, indicating solid operational performance excluding non-recurring items.
  • 4The pending acquisition of Black Knight, Inc. remains on track for an expected close in the first half of 2023, with Black Knight stockholders having approved the transaction.
  • 5The Exchanges segment showed strong growth with a 10% increase in revenues for Q3 2022, driven by financial and cash equities volume.
  • 6The Mortgage Technology segment experienced a revenue decline of 25% for Q3 2022, attributed to rising interest rates impacting mortgage origination volumes.
  • 7ICE returned capital to shareholders through $632 million in share repurchases during the first nine months of 2022 and paid $640 million in dividends.

Frequently Asked Questions

The primary driver of the net loss of $175 million in the third quarter of 2022 was a significant increase in 'Other income/(expense), net,' largely due to substantial losses from equity method investments, most notably from Bakkt. Additionally, an impairment charge of $40 million on the Bakkt investment contributed to the loss.

ICE has a robust liquidity position, with $1.2 billion in cash and cash equivalents and $6.4 billion in restricted cash as of September 30, 2022. The company issued $8.0 billion in new senior notes in May 2022 to finance a portion of the Black Knight acquisition, and has access to a $3.9 billion revolving credit facility. As of September 30, 2022, there were no amounts outstanding under its commercial paper program or term loan facility, indicating strong management of its debt obligations.

The Mortgage Technology segment saw a 25% revenue decrease in the third quarter, primarily due to rising interest rates which have reduced mortgage origination volumes. While this segment is currently facing headwinds, the company is focused on providing end-to-end workflow solutions for the U.S. residential mortgage market. The pending acquisition of Black Knight, a key player in this space, is expected to strengthen ICE's position in mortgage technology.

Intercontinental Exchange operates internationally and is exposed to foreign currency exchange rate risk, primarily with the Pound Sterling and Euro. The company monitors this exposure and may enter into foreign currency hedging transactions to mitigate risks. For the nine months ended September 30, 2022, consolidated operating expenses were $27 million lower due to favorable foreign exchange effects, and revenues, less transaction-based expenses, were $66 million lower in the Exchanges segment due to currency fluctuations.