Intercontinental Exchange(ICE) - 2024 Q1 - Quarterly Results

Financial Highlights Intercontinental Exchange reported record Q1 2024 net revenues of $2.3 billion, a 21% increase, driven by its diversified business model and strong earnings Q1 2024 Key Financial Metrics | Metric | Q1 2024 | YoY Change | | :--- | :--- | :--- | | Net Revenues | $2.3 billion | +21% | | GAAP Diluted EPS | $1.33 | +14% | | Adjusted Diluted EPS | $1.48 | +5% | | Operating Income | $1.1 billion | +10% | | Adjusted Operating Income | $1.4 billion | +18% | | Operating Margin | 46% | N/A | | Adjusted Operating Margin | 59% | N/A | - CEO Jeffrey C. Sprecher emphasized the 'all-weather nature' of the business model, as customers rely on ICE's data and technology for risk management and workflow efficiencies, driving revenue and earnings growth[2] - CFO Warren Gardiner attributed the record revenue and operating income to the strength of the company's balanced business and strategic investments aimed at long-term profitable growth[4] Segment Performance Consolidated net revenues reached $2.3 billion in Q1 2024, driven by strong performance across all segments, with 25% recurring revenue growth Q1 2024 Revenue and Margin by Segment | Segment | Net Revenues ($M) | Operating Margin | Adj. Operating Margin | | :--- | :--- | :--- | :--- | | Exchanges | $1,223 | 73% | 75% | | Fixed Income and Data Services | $568 | 38% | 46% | | Mortgage Technology | $499 | (10)% | 37% | | Consolidated | $2,290 | 46% | 59% | Q1 2024 Revenue Type Breakdown | Revenue Type | Q1 2024 ($M) | Q1 2023 ($M) | % Change | | :--- | :--- | :--- | :--- | | Recurring Revenues | $1,196 | $953 | 25% | | Transaction Revenues, net | $1,094 | $943 | 16% | Exchanges Segment Results The Exchanges segment's net revenues grew 12% to $1.2 billion, primarily driven by a 33% surge in Energy revenue, maintaining a 75% adjusted operating margin Exchanges Segment Revenue Breakdown (Q1 2024 vs Q1 2023) | Revenue Source | Q1 2024 ($M) | Q1 2023 ($M) | % Change | | :--- | :--- | :--- | :--- | | Energy | $457 | $345 | 33% | | Ags and Metals | $72 | $70 | 3% | | Financials | $135 | $128 | 6% | | Cash Equities and Equity Options | $99 | $95 | 4% | | Data and Connectivity Services | $235 | $232 | 1% | | Listings | $122 | $126 | (4)% | | Total Segment Revenues | $1,223 | $1,097 | 12% | Fixed Income and Data Services Segment Results Fixed Income and Data Services segment revenue increased 1% to $568 million, driven by data and analytics growth, despite declines in transaction-based revenues Fixed Income and Data Services Revenue Breakdown (Q1 2024 vs Q1 2023) | Revenue Source | Q1 2024 ($M) | Q1 2023 ($M) | % Change | | :--- | :--- | :--- | :--- | | Fixed Income Execution | $26 | $32 | (15)% | | CDS Clearing | $93 | $101 | (8)% | | Fixed Income Data and Analytics | $288 | $276 | 4% | | Other Data and Network Services | $161 | $154 | 4% | | Total Segment Revenues | $568 | $563 | 1% | Mortgage Technology Segment Results Mortgage Technology segment revenue surged 111% to $499 million, driven by acquisitions and strong growth in Servicing Software and Data and Analytics Mortgage Technology Revenue Breakdown (Q1 2024 vs Q1 2023) | Revenue Source | Q1 2024 ($M) | Q1 2023 ($M) | % Change | | :--- | :--- | :--- | :--- | | Origination Technology | $174 | $174 | —% | | Closing Solutions | $44 | $41 | 9% | | Servicing Software | $214 | — | n/a | | Data and Analytics | $67 | $21 | 210% | | Total Segment Revenues | $499 | $236 | 111% | Financial Guidance and Other Matters ICE provided full-year 2024 adjusted operating expense guidance of $3.79 billion to $3.82 billion, with Mortgage Technology revenue growth expected to be flat to down - Key Q1 2024 financial metrics: - Operating cash flow: $1.0 billion - Adjusted free cash flow: $877 million - Outstanding debt: $22.0 billion as of March 31, 2024 - Dividends paid: $258 million[16] - Updated Financial Guidance: - Full Year 2024 Adj. OpEx: $3.79B - $3.82B - Q2 2024 Adj. OpEx: $945M - $955M - Q2 2024 Adj. Non-operating Expense: $205M - $210M - Q2 2024 Diluted Share Count: 572M - 578M shares[16] - The company expects full-year 2024 Mortgage Technology pro forma segment revenue growth to be flat-to-down in the low single-digit range[16] Consolidated Financial Statements The consolidated financial statements detail ICE's Q1 2024 net income of $767 million, an increase from the prior year, with total assets of $131.4 billion and equity of $26.2 billion Consolidated Statements of Income Q1 2024 total revenues less transaction-based expenses grew to $2.29 billion, with operating income increasing to $1.06 billion and net income attributable to ICE rising to $767 million Q1 2024 vs Q1 2023 Income Statement Highlights | Metric ($M) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total revenues, less transaction-based expenses | $2,290 | $1,896 | | Total operating expenses | $1,227 | $927 | | Operating income | $1,063 | $969 | | Net income attributable to Intercontinental Exchange, Inc. | $767 | $655 | | Diluted EPS | $1.33 | $1.17 | Consolidated Balance Sheets As of March 31, 2024, total assets were $131.4 billion, with $30.5 billion in goodwill and $20.1 billion in long-term debt, and total equity at $26.3 billion Balance Sheet Highlights (as of March 31, 2024) | Account ($M) | Mar 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $863 | $899 | | Total assets | $131,397 | $136,084 | | Goodwill | $30,549 | $30,553 | | Long-term debt | $20,068 | $20,659 | | Total liabilities | $105,108 | $110,298 | | Total equity | $26,289 | $25,786 | Non-GAAP Financial Measures and Reconciliation This section details adjustments to GAAP results for non-GAAP measures, providing greater transparency by excluding items like acquisition-related intangibles and transaction costs - The company uses non-GAAP measures to provide investors with greater transparency and a better understanding of factors affecting its financial condition and results of operations, as they are not reflective of core business performance[23] - Key adjustments to GAAP results include: - Amortization of acquisition-related intangibles - Transaction and integration costs - Litigation and regulatory matters - Net losses from unconsolidated investees[24][27] Adjusted Operating Income, Operating Margin and Operating Expense Reconciliation Q1 2024 GAAP operating income of $1.06 billion was adjusted to $1.36 billion non-GAAP, primarily by excluding $254 million in amortization and $36 million in transaction costs Consolidated GAAP to Non-GAAP Operating Income Reconciliation (Q1 2024) | Metric ($M) | Amount | | :--- | :--- | | Operating income (GAAP) | $1,063 | | Amortization of acquisition-related intangibles | +$254 | | Transaction and integration costs | +$36 | | Other | +$7 | | Adjusted operating income (Non-GAAP) | $1,360 | Adjusted Net Income Attributable to ICE and Diluted EPS Adjusted net income for Q1 2024 was $852 million ($1.48 per diluted share), compared to GAAP net income of $767 million ($1.33 per diluted share), after various adjustments GAAP to Non-GAAP Net Income Reconciliation (Q1 2024) | Metric ($M, except per share) | Amount | | :--- | :--- | | Net income attributable to ICE (GAAP) | $767 | | Adjustments (net) | +$85 | | Adjusted net income attributable to ICE (Non-GAAP) | $852 | | Diluted EPS (GAAP) | $1.33 | | Adjusted diluted EPS (Non-GAAP) | $1.48 | Adjusted Free Cash Flow Calculation Q1 2024 adjusted free cash flow increased to $877 million from $673 million in Q1 2023, derived from operating activities less capital expenditures and capitalized software Adjusted Free Cash Flow Calculation (Q1 2024 vs Q1 2023) | Metric ($M) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,009 | $653 | | Less: Capital expenditures & capitalized software | ($145) | ($85) | | Free cash flow | $864 | $568 | | Add: Section 31 fees, net | $13 | $105 | | Adjusted free cash flow | $877 | $673 |