Intercontinental Exchange(ICE) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - First quarter revenues reached a record $1.8 billion, up 4% year-over-year on a pro forma basis, with adjusted earnings per share increasing by 7% to $1.34 compared to $1.25 in the previous year [6][8] - Adjusted operating expenses for the first quarter totaled $729 million, with expectations for second quarter adjusted operating expenses to be between $742 million and $752 million [7][8] - Free cash flow for the first quarter exceeded $700 million, allowing for a 12% increase in dividend payout and a reduction in leverage to 3.8x EBITDA by quarter's end [8] Business Line Performance Changes - The Exchange segment generated revenues of $974 million, with transaction revenues of $653 million, marking the second-best quarter in the company's history [9] - Fixed Income and Data Services segment revenues totaled $468 million, with recurring revenues growing by 6.5% year-over-year [11] - Mortgage Technology segment revenues grew by 61% year-over-year, with transaction revenues increasing by 84% [13] Market Data and Key Metrics Changes - Open interest in the Exchange segment increased by 13% compared to the end of 2020, with notable growth in energy and financial futures [9] - The number of participants in the European TTF and Asian JKM gas complexes grew by double digits year-over-year, with TTF futures reaching record volumes [20] - Environmental markets saw price appreciation in European emissions, driving the ICE Global Carbon Index to record levels [22] Company Strategy and Industry Competition - The company is focused on leveraging technology and data to drive innovation and efficiency in the mortgage industry, aiming for a significant addressable market of $4 billion in origination and processing [28][31] - The launch of ICE Futures Abu Dhabi is seen as a strategic move to capture market share in the Middle East and Asia, with a focus on managing risk at the point of production [19][56] - The company continues to invest in its business segments to meet customer needs and enhance shareholder returns [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to grow through business cycles, emphasizing the importance of digital transformation in the mortgage sector [41][62] - The company anticipates continued growth in recurring revenues across its business segments, with a full-year growth expectation of 5% to 6% in Fixed Income and Data Services [12] - Management highlighted the resilience of the business model, which is not tied to a single economic cycle or asset class, allowing for growth across various environments [33] Other Important Information - The company sold its 1.4% stake in Coinbase, generating over $1.2 billion in gross proceeds, which will be used to reduce debt [8] - The transition of CFO responsibilities from Scott Hill to Warren Gardiner is expected to be smooth, with both individuals having worked closely together [35] Q&A Session Summary Question: Mortgage segment growth and classification - Management confirmed a downturn in closed loans but emphasized growth through digital transformation and the unique value proposition of their platform [40][41] Question: Capital prioritization and debt pay-down - The company is ahead of schedule in paying down debt and plans to use proceeds from the Coinbase sale for further flexibility in capital allocation [49] Question: ICE Futures Abu Dhabi and future ambitions - Management discussed the successful launch of the Murban crude contract and the potential for expanding product offerings in the region [52][56] Question: Mortgage business and refi concerns - Management addressed concerns about the refi market, indicating a balanced approach to transaction revenues and emphasizing long-term growth strategies [60][62] Question: Data and analytics usage and customer penetration - Management noted that current revenues represent only 2% to 3% of the $4 billion TAM, indicating significant growth potential in data and analytics services [78]