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Intercontinental Exchange Reports Strong Third Quarter 2021

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·18-min read
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ATLANTA & NEW YORK, October 28, 2021--(BUSINESS WIRE)--

Jeffrey C. Sprecher,
ICE Chairman & Chief Executive Officer, said,
"We are pleased to report our strong third quarter results which extend our track record of growth. Our customers continue to rely on our mission-critical data and technology to provide transparency and efficiencies across asset classes and through an array of macroeconomic environments. We remain focused on collaboration and innovation to serve our customers, generate growth and deliver value to our stockholders."

Intercontinental Exchange (NYSE: ICE), a leading global provider of data, technology and market infrastructure, today reported financial results for the third quarter of 2021. For the quarter ended September 30, 2021, consolidated net income attributable to ICE was $633 million on $1.8 billion of consolidated revenues, less transaction-based expenses. Third quarter GAAP diluted earnings per share (EPS) were $1.12. Adjusted net income attributable to ICE was $735 million in the third quarter and adjusted diluted EPS were $1.30. Please refer to the reconciliation of non-GAAP financial measures included in this press release for more information on our adjusted operating expenses, adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted EPS and free cash flow.

Warren Gardiner, ICE Chief Financial Officer, added: "In the third quarter, we generated double-digit revenue, operating income and earnings per share growth. This strong performance, including double digit growth in our recurring revenues, was driven by contributions from all three business segments and is a testament to the power of our diverse business model. Additionally, our strong cash flows and strategic capital allocation will enable us to accelerate capital return to our shareholders while also continuing to invest."

Third Quarter 2021 Business Highlights

$ (in millions)

Net Revenue

Op Margin

Adj Op Margin

3Q21

Exchanges

$959

66%

68%

Fixed Income and Data Services

$477

29%

39%

Mortgage Technology

$366

30%

58%

Consolidated

$1,802

49%

58%

Third quarter consolidated net revenues were $1.8 billion, up 28% year-over-year including exchange net revenues of $959 million, fixed income and data services revenues of $477 million and mortgage technology revenues of $366 million. Consolidated operating expenses were $924 million for the third quarter of 2021. On an adjusted basis, consolidated operating expenses were $755 million. Consolidated operating income for the third quarter was $878 million and the operating margin was 49%. On an adjusted basis, consolidated operating income for the third quarter was $1.0 billion and the adjusted operating margin was 58%.

Exchanges Segment Results

Third quarter exchange net revenues were $959 million. Exchange operating expenses were $330 million and on an adjusted basis, were $309 million in the third quarter. Segment operating income for the third quarter was $629 million and the operating margin was 66%. On an adjusted basis, operating income was $650 million and the adjusted operating margin was 68%.

$ (in millions)

3Q21

3Q20

% Chg

Revenue, net:

Energy

$316

$229

38%

Ags and Metals

56

54

5%

Financials(1)

93

76

24%

Cash Equities and Equity Options

79

74

7%

OTC and Other(2)

84

73

14%

Data and Connectivity Services

208

201

3%

Listings

123

111

10%

Segment Revenue

$959

$818

17%

(1) Financials include interest rates and other financial futures and options.

(2) OTC & other includes physical energy, interest income on certain clearing margin deposits, regulatory penalties and fines, fees for use of our facilities, regulatory fees charged to member organizations of our U.S. securities exchanges, designated market maker service fees, technology development fees, exchange member fees, and agriculture grading and certification fees.

Fixed Income and Data Services Segment Results

Third quarter fixed income and data services revenues were $477 million. Fixed income and data services operating expenses were $338 million and adjusted operating expenses were $293 million in the third quarter. Segment operating income for the third quarter was $139 million and the operating margin was 29%. On an adjusted basis, operating income was $184 million and the adjusted operating margin was 39%.

$ (in millions)

3Q21

3Q20

% Chg

Const
Curr(1)

Revenue:

Fixed Income Execution

$12

$15

(18)%

(18)%

CDS Clearing

51

47

9%

9%

Fixed Income Data and Analytics

272

259

5%

5%

Other Data and Network Services

142

129

10%

9%

Segment Revenue

$477

$450

6%

6%

(1) Net revenues in constant currency are calculated holding both the pound sterling and euro at the average exchange rate from 3Q20, 1.2916 and 1.1691, respectively.

Mortgage Technology Segment Results

Third quarter mortgage technology revenues were $366 million. Mortgage technology operating expenses were $256 million and adjusted operating expenses were $153 million in the third quarter. Segment operating income for the third quarter was $110 million and the operating margin was 30%. On an adjusted basis, operating income was $213 million and the adjusted operating margin was 58%.

$ (in millions)

3Q21

3Q20

% Chg(1)

Revenue:

Origination Technology

$245

$67

n/a

Closing Solutions

88

67

31%

Data and Analytics

19

5

n/a

Other

14

4

n/a

Segment Revenue

$366

$143

n/a

(1) Percentage changes in the table above deemed "n/a" are not meaningful due to the acquisition of Ellie Mae in September 2020.

Other Matters

  • The effective tax rate for the third quarter of 2021 was 23%.

  • Operating cash flow through the third quarter of 2021 was $2.1 billion and free cash flow was $2.0 billion.

  • Unrestricted cash was $618 million and outstanding debt was $14.2 billion as of September 30, 2021.

  • Through the third quarter of 2021, ICE paid $561 million in dividends.

  • ICE expects to resume share repurchases in the fourth quarter.

  • Bakkt completed its merger with VPC Impact Acquisition Holdings on October 15, 2021.

  • ICE reached an agreement to sell its 9.85% stake in Euroclear for €709 million. The transaction could close as soon as the first half of 2022, subject to regulatory approvals.

Financial Guidance

  • ICE's fourth quarter 2021 total recurring revenues are expected to be in a range of $892 million to $907 million.

    • Exchanges fourth quarter 2021 total recurring revenues are expected to be in a range of $330 million to $335 million.

    • Fixed Income & Data Services fourth quarter 2021 total recurring revenues are expected to be in a range of $415 million to $420 million.

    • Mortgage Technology fourth quarter 2021 total recurring revenues are expected to be in a range of $147 million to $152 million.

  • ICE's fourth quarter 2021 GAAP operating expenses are expected to be in a range of $922 million to $932 million. Adjusted operating expenses(1) are expected to be in a range of $737 million to $747 million, including approximately $10 million related to Bakkt.

  • ICE's fourth quarter 2021 GAAP non-operating income(2) is expected to be in the range of $1.185 billion to $1.190 billion, including an expected gain on the Bakkt merger of approximately $1.3 billion. Adjusted non-operating expense is expected to be in the range of $100 million to $105 million.

  • ICE's diluted share count for the fourth quarter is expected to be in the range of 563 million to 569 million weighted average shares outstanding, excluding the impact of any potential share repurchases.

(1) 2021 and 4Q21 non-GAAP operating expenses exclude amortization of acquisition-related intangibles and transaction & integration costs.

(2) Non-operating income / expense includes interest income, interest expense and net other income. Non-GAAP non-operating expense excludes the equity earnings from unconsolidated investees and the expected gain on Bakkt merger.

Earnings Conference Call Information

ICE will hold a conference call today, October 28, 2021, at 8:30 a.m. ET to review its third quarter 2021 financial results. A live audio webcast of the earnings call will be available on the company's website at www.theice.com in the investor relations section. Participants may also listen via telephone by dialing 844-512-2926 from the United States or 412-317-6300 from outside of the United States. Telephone participants are required to provide the participant entry number 8624010 and are recommended to call 10 minutes prior to the start of the call. The call will be archived on the company's website for replay.

The conference call for the fourth quarter 2021 earnings has been scheduled for February 3rd, 2022 at 8:30 a.m. ET. Please refer to the Investor Relations website at www.ir.theice.com for additional information.

Historical futures, options and cash ADV, rate per contract, open interest data and CDS cleared information can be found at: https://ir.theice.com/home/default.aspx.

Consolidated Statements of Income

(In millions, except per share amounts)

(Unaudited)

Nine Months Ended

September 30,

Three Months Ended

September 30,

Revenues:

2021

2020

2021

2020

Exchanges

$

4,376

$

4,406

$

1,434

$

1,337

Fixed income and data services

1,403

1,360

477

450

Mortgage technology

1,061

245

366

143

Total revenues

6,840

6,011

2,277

1,930

Transaction-based expenses:

Section 31 fees

204

465

38

145

Cash liquidity payments, routing and clearing

1,330

1,181

437

374

Total revenues, less transaction-based expenses

5,306

4,365

1,802

1,411

Operating expenses:

Compensation and benefits

1,093

849

374

298

Professional services

124

100

43

37

Acquisition-related transaction and integration costs

42

90

14

76

Technology and communication

495

388

168

131

Rent and occupancy

61

59

20

19

Selling, general and administrative

163

132

52

43

Depreciation and amortization

759

494

253

180

Total operating expenses

2,737

2,112

924

784

Operating income

2,569

2,253

878

627

Other income (expense):

Interest income

9

1

Interest expense

(321

)

(245

)

(108

)

(89

)

Other income, net

1,341

75

54

44

Other income (expense), net

1,020

(161

)

(54

)

(44

)

Income before income tax expense

3,589

2,092

824

583

Income tax expense

1,049

512

187

189

Net income

$

2,540

$

1,580

$

637

$

394

Net income attributable to non-controlling interest

(9

)

(17

)

(4

)

(4

)

Net income attributable to Intercontinental Exchange, Inc.

$

2,531

$

1,563

$

633

$

390

Earnings per share attributable to Intercontinental Exchange, Inc. common stockholders:

Basic

$

4.50

$

2.85

$

1.12

$

0.71

Diluted

$

4.48

$

2.83

$

1.12

$

0.71

Weighted average common shares outstanding:

Basic

563

549

563

548

Diluted

565

552

566

551

Consolidated Balance Sheets

(In millions)

As of

September 30, 2021

As of

(Unaudited)

December 31, 2020

Assets:

Current assets:

Cash and cash equivalents

$

618

$

583

Short-term restricted cash and cash equivalents

1,045

1,000

Customer accounts receivable, net

1,327

1,230

Margin deposits, guaranty funds and delivery contracts receivable

108,698

84,083

Prepaid expenses and other current assets

1,032

323

Total current assets

112,720

87,219

Property and equipment, net

1,723

1,713

Other non-current assets:

Goodwill

21,309

21,291

Other intangible assets, net

13,928

14,408

Long-term restricted cash and cash equivalents

398

408

Other non-current assets

584

1,161

Total other non-current assets

36,219

37,268

Total assets

$

150,662

$

126,200

Liabilities and Equity:

Current liabilities:

Accounts payable and accrued liabilities

$

696

$

639

Section 31 fees payable

14

207

Accrued salaries and benefits

275

346

Deferred revenue

322

158

Short-term debt

1,831

2,411

Margin deposits, guaranty funds and delivery contracts payable

108,698

84,083

Other current liabilities

196

155

Total current liabilities

112,032

87,999

Non-current liabilities:

Non-current deferred tax liability, net

3,689

3,563

Long-term debt

12,394

14,126

Accrued employee benefits

200

206

Non-current operating lease liability

274

320

Other non-current liabilities

394

359

Total non-current liabilities

16,951

18,574

Total liabilities

128,983

106,573

Commitments and contingencies

Redeemable non-controlling interest in consolidated subsidiaries

87

93

Equity:

Intercontinental Exchange, Inc. stockholders’ equity:

Common stock

6

6

Treasury stock, at cost

(5,269

)

(5,200

)

Additional paid-in capital

14,019

13,845

Retained earnings

13,009

11,039

Accumulated other comprehensive loss

(206

)

(192

)

Total Intercontinental Exchange, Inc. stockholders’ equity

21,559

19,498

Non-controlling interest in consolidated subsidiaries

33

36

Total equity

21,592

19,534

Total liabilities and equity

$

150,662

$

126,200

Non-GAAP Financial Measures and Reconciliation

We use non-GAAP measures internally to evaluate our performance and in making financial and operational decisions. When viewed in conjunction with our GAAP results and the accompanying reconciliation, we believe that our presentation of these measures provides investors with greater transparency and a greater understanding of factors affecting our financial condition and results of operations than GAAP measures alone. In addition, we believe the presentation of these measures is useful to investors for period-to-period comparison of results because the items described below as adjustments to GAAP are not reflective of our core business performance. These financial measures are not in accordance with, or an alternative to, GAAP financial measures and may be different from non-GAAP measures used by other companies. We use these adjusted results because we believe they more clearly highlight trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures, since these measures eliminate from our results specific financial items that have less bearing on our core operating performance. We strongly recommend that investors review the GAAP financial measures and additional non-GAAP information included in our Quarterly Report on Form 10-Q, including our consolidated financial statements and the notes thereto.

Adjusted operating expenses, adjusted operating income, adjusted operating margin, adjusted net income attributable to ICE common stockholders, adjusted diluted earnings per share and free cash flow for the periods presented below are calculated by adding or subtracting the adjustments described below, which are not reflective of our cash operations and core business performance, and their related income tax effect and other tax adjustments (in millions, except for per share amounts):

Adjusted Operating Income, Operating Margin and Operating Expense Reconciliation

(In millions)

(Unaudited)

Exchanges
Segment

Fixed Income
and Data
Services
Segment

Mortgage
Technology
Segment

Consolidated

Nine Months
Ended
September 30,

Nine Months
Ended
September 30,

Nine Months
Ended
September 30,

Nine Months
Ended
September 30,

2021

2020

2021

2020

2021

2020

2021

2020

Total revenues, less transaction-based expenses

$2,842

$2,760

$1,403

$1,360

$1,061

$245

$5,306

$4,365

Operating expenses

977

919

1,010

987

750

206

2,737

2,112

Less: Amortization of acquisition-related intangibles

56

53

136

144

277

38

469

235

Less: Transaction and integration costs and acquisition-related success fees

12

10

28

76

40

86

Less: Accrual relating to a regulatory settlement

8

8

Adjusted operating expenses

$909

$856

$874

$835

$445

$92

$2,228

$1,783

Operating income

$1,865

$1,841

$393

$373

$311

$39

$2,569

$2,253

Adjusted operating income

$1,933

$1,904

$529

$525

$616

$153

$3,078

$2,582

Operating margin

66%

67%

28%

27%

29%

16%

48%

52%

Adjusted operating margin

68%

69%

38%

39%

58%

62%

58%

59%

Adjusted Operating Income, Operating Margin and Operating Expense Reconciliation

(In millions)

(Unaudited)

Exchanges
Segment

Fixed Income
and Data
Services
Segment

Mortgage
Technology
Segment

Consolidated

Three Months
Ended
September 30,

Three Months
Ended
September 30,

Three Months
Ended
September 30,

Three Months
Ended
September 30,

2021

2020

2021

2020

2021

2020

2021

2020

Total revenues, less transaction-based expenses

$959

$818

$477

$450

$366

$143

$1,802

$1,411

Operating expenses

330

297

338

331

256

156

924

784

Less: Amortization of acquisition-related intangibles

19

18

45

48

92

28

156

94

Less: Transaction and integration costs

2

11

76

13

76

Less: Accrual relating to a regulatory settlement

3

3

Adjusted operating expenses

$309

$279

$293

$280

$153

$52

$755

$611

Operating income

$629

$521

$139

$119

$110

$(13)

$878

$627

Adjusted operating income

$650

$539

$184

$170

$213

$91

$1,047

$800

Operating margin

66%

64%

29%

26%

30%

(9)%

49%

44%

Adjusted operating margin

68%

66%

39%

38%

58%

64%

58%

57%

Adjusted Net Income Attributable to ICE and EPS

(In millions)

(Unaudited)

Nine Months
Ended
September 30,
2021

Nine Months
Ended
September 30,
2020

Net income attributable to ICE

$

2,531

$

1,563

Add: Amortization of acquisition-related intangibles

469

235

Add: Transaction and integration costs and acquisition-related success fees

40

86

Add: Accelerated unamortized costs related to the early payoff of the June 2023 floating rate senior notes

4

Add: Extinguishment of December 2020 Senior Notes

14

Add: Pre-acquisition interest expense on debt issued for Ellie Mae acquisition

5

Add: Accrual relating to legal settlement

16

Add: Accrual relating to regulatory settlement

8

Add: Impairment of CAT promissory notes

2

Less: Gain on sale of Coinbase equity investment

(1,227

)

Less: Gain on value of equity investment

(34

)

Less: Gain related to the settlement of an acquisition-related indemnification claim

(7

)

Less: Net income from unconsolidated investees

(42

)

(84

)

Add/(Less): Income tax effect for the above items

204

(62

)

Add: Deferred tax adjustments on acquisition-related intangibles

196

33

Adjusted net income attributable to ICE

$

2,150

$

1,800

Basic earnings per share

$

4.50

$

2.85

Diluted earnings per share

$

4.48

$

2.83

Adjusted basic earnings per share

$

3.82

$

3.28

Adjusted diluted earnings per share

$

3.80

$

3.26

Basic weighted average common shares outstanding

563

549

Diluted weighted average common shares outstanding

565

552

Adjusted Net Income Attributable to ICE and EPS

(In millions)

(Unaudited)

Three Months
Ended
September 30,
2021

Three Months
Ended
September 30,
2020

Net income attributable to ICE

$

633

$

390

Add: Amortization of acquisition-related intangibles

156

94

Add: Transaction and integration costs

13

76

Add: Accrual related to legal settlement

16

Add: Accrual related to regulatory settlement

3

Add: Accelerated unamortized costs related to the early payoff of the June 2023 floating rate senior notes

4

Add: Pre-acquisition interest expense on debt issued for Ellie Mae acquisition

5

Less: Gain on value of equity investment

(34

)

Less: Net income from unconsolidated investees

(8

)

(49

)

Less: Income tax effect for the above items

(44

)

(29

)

Add/(Less): Deferred tax adjustments on acquisition-related intangibles

(1

)

43

Adjusted net income attributable to ICE

$

735

$

533

Basic earnings per share

$

1.12

$

0.71

Diluted earnings per share

$

1.12

$

0.71

Adjusted basic earnings per share

$

1.31

$

0.97

Adjusted diluted earnings per share

$

1.30

$

0.97

Basic weighted average common shares outstanding

563

548

Diluted weighted average common shares outstanding

566

551

Free Cash Flow Calculation

(In millions)

(Unaudited)

Nine months ended
September 30, 2021

Nine months ended
September 30, 2020

Cash flow from operations

$2,130

$1,815

Less: Capital expenditures and capitalized software development costs

(328

)

(268

)

Add: Section 31 fees, net

193

85

Free cash flow

$1,995

$1,632

About Intercontinental Exchange

Intercontinental Exchange, Inc. (NYSE: ICE) is a Fortune 500 company that designs, builds and operates digital networks to connect people to opportunity. We provide financial technology and data services across major asset classes that offer our customers access to mission-critical workflow tools that increase transparency and operational efficiencies. We operate exchanges, including the New York Stock Exchange, and clearing houses that help people invest, raise capital and manage risk across multiple asset classes. Our comprehensive fixed income data services and execution capabilities provide information, analytics and platforms that help our customers capitalize on opportunities and operate more efficiently. At ICE Mortgage Technology, we are transforming and digitizing the U.S. residential mortgage process, from consumer engagement through loan registration. Together, we transform, streamline and automate industries to connect our customers to opportunity.

Trademarks of ICE and/or its affiliates include Intercontinental Exchange, ICE, ICE block design, NYSE and New York Stock Exchange. Information regarding additional trademarks and intellectual property rights of Intercontinental Exchange, Inc. and/or its affiliates is located here. Key Information Documents for certain products covered by the EU Packaged Retail and Insurance-based Investment Products Regulation can be accessed on the relevant exchange website under the heading "Key Information Documents (KIDS)."

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 - Statements in this press release regarding ICE's business that are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of additional risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see ICE's Securities and Exchange Commission (SEC) filings, including, but not limited to, the risk factors in Intercontinental Exchange, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on February 4, 2021. We caution you not to place undue reliance on these forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of an unanticipated event. New factors emerge from time to time, and it is not possible for management to predict all factors that may affect our business and prospects. Further, management cannot assess the impact of each factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

SOURCE: Intercontinental Exchange

ICE-CORP

View source version on businesswire.com: https://www.businesswire.com/news/home/20211028005374/en/

Contacts

ICE Investor Relations Contact:
Mary Caroline O'Neal
+1 770 738 2151
marycaroline.oneal@ice.com

investors@ice.com

ICE Media Contact:
Josh King
+1 212 656 2490
josh.king@ice.com

media@ice.com

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