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Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses and provider of global data and listing services, today reported financial results for the first quarter of 2017. For the quarter ended March 31, 2017, consolidated net income attributable to ICE was $502 million on $1.2 billion of consolidated revenues less transaction-based expenses. First quarter GAAP diluted earnings per share (EPS) were $0.84. On an adjusted basis, net income was $441 million in the first quarter, and diluted EPS were $0.74. Please refer to the reconciliation of non-GAAP financial measures included in the press release for more information on our adjusted net income and adjusted diluted EPS.
“The solid volume and open interest growth in our futures markets, together with strong results in our data and listings segment, demonstrates that we are holistically serving our customers on a global scale by leveraging our comprehensive trading, data and risk management solutions," said ICE Chairman & CEO Jeffrey C. Sprecher. "Our progress in reorganizing and integrating our data services allows us to serve our customers in new ways as their needs evolve. In addition, our success in hosting virtually every recent major IPO at the NYSE, demonstrates how our unique market model continues to be the preferred model for listed companies."
Scott A. Hill, ICE CFO, added: “Our results were driven by executing in our core business while integrating our acquisitions. We generated operating cash flows of $611 million in the quarter, the second highest quarter in our history, which enabled us to significantly increase our share repurchases to $229 million and to increase our dividend 17% to $120 million, while continuing to invest in our growth initiatives. We are well positioned to continue to deliver strong returns to our shareholders in 2017 and beyond."
First Quarter 2017 GAAP Results
First quarter 2017 consolidated revenues, less transaction-based expenses, were $1.2 billion. Trading and clearing segment revenues, less transaction-based expenses, were $538 million in the first quarter 2017, down 6% compared to the prior first quarter. Data and listings segment revenues were $626 million in the first quarter of 2017, up 8% compared to the prior first quarter, including data services revenues of $520 million, up 9% and listings revenues of $106 million, up 2%.
Consolidated operating expenses were $582 million for the first quarter of 2017, including $12 million in Interactive Data transaction and integration expenses. Consolidated operating income for the first quarter was $582 million and operating margin was 50%. The effective tax rate for the first quarter was 30%.
Unrestricted cash was $360 million and outstanding debt was $6.2 billion as of March 31, 2017.
Financial Guidance
- ICE's second quarter 2017 GAAP operating expenses are expected to be in a range of $550 millionto $560 million and adjusted operating expenses(1) are expected to be in a range of $485 million to $495 million.
- ICE's diluted share count for the second quarter and full year 2017 is expected to be in the range of 590 million to 600 million weighted average shares outstanding.
(1) The second quarter of 2017 Non-GAAP adjusted operating expense excludes $66 million in amortization of acquisition-related intangibles for the second quarter of 2017. The GAAP operating expense forecast does not reflect an estimate of acquisition-related transaction and integration costs for the second quarter of 2017.
Earnings Conference Call Information
ICE will hold a conference call today, May 3, at 8:30 a.m. ET to review its first quarter 2017 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 888-317-6003 from the United States, 866-284-3684 from Canada or 412-317-6061 from outside of the United States and Canada. Telephone participants are required to provide the participant entry number 2407579 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 second quarter 2017 earnings has been scheduled for August 3, 2017 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: http://ir.theice.com/investors-and-media/supplemental-volume-info/default.aspx
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Consolidated Statements of Income (In millions, except per share amounts) (Unaudited) |
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Three Months Ended |
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| Revenues: | 2017 | 2016 | ||||||
| Transaction and clearing, net | $ | 798 | $ | 929 | ||||
| Data services | 520 | 477 | ||||||
| Listings | 106 | 103 | ||||||
| Other revenues | 45 | 45 | ||||||
| Total revenues | 1,469 | 1,554 | ||||||
| Transaction-based expenses: | ||||||||
| Section 31 fees | 91 | 98 | ||||||
| Cash liquidity payments, routing and clearing | 214 | 302 | ||||||
| Total revenues, less transaction-based expenses | 1,164 | 1,154 | ||||||
| Operating expenses: | ||||||||
| Compensation and benefits | 245 | 236 | ||||||
| Professional services | 32 | 32 | ||||||
| Acquisition-related transaction and integration costs | 14 | 27 | ||||||
| Technology and communication | 98 | 92 | ||||||
| Rent and occupancy | 18 | 18 | ||||||
| Selling, general and administrative | 41 | 22 | ||||||
| Depreciation and amortization | 134 | 143 | ||||||
| Total operating expenses | 582 | 570 | ||||||
| Operating income | 582 | 584 | ||||||
| Other income (expense): | ||||||||
| Interest expense | (45 | ) | (46 | ) | ||||
| Other income, net | 186 | 2 | ||||||
| Other income (expense), net | 141 | (44 | ) | |||||
| Income before income tax expense | 723 | 540 | ||||||
| Income tax expense | 213 | 163 | ||||||
| Net income | $ | 510 | $ | 377 | ||||
| Net income attributable to non-controlling interest | (8 | ) | (8 | ) | ||||
| Net income attributable to Intercontinental Exchange, Inc. | $ | 502 | $ | 369 | ||||
| Earnings per share attributable to Intercontinental Exchange, Inc. common shareholders: | ||||||||
| Basic | $ | 0.84 | $ | 0.62 | ||||
| Diluted | $ | 0.84 | $ | 0.62 | ||||
| Weighted average common shares outstanding: | ||||||||
| Basic | 594 | 595 | ||||||
| Diluted | 599 | 598 | ||||||
| Dividend per share | $ | 0.20 | $ | 0.17 | ||||
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Consolidated Balance Sheets (In millions) (Unaudited) |
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| As of | As of | |||||||
| March 31, 2017 | December 31, 2016 | |||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 360 | $ | 407 | ||||
| Short-term investments | 21 | 23 | ||||||
| Short-term restricted cash and investments | 743 | 679 | ||||||
| Customer accounts receivable, net | 999 | 777 | ||||||
| Margin deposits and guaranty funds | 52,354 | 55,150 | ||||||
| Prepaid expenses and other current assets | 596 | 97 | ||||||
| Total current assets | 55,073 | 57,133 | ||||||
| Property and equipment, net | 1,132 | 1,129 | ||||||
| Other non-current assets: | ||||||||
| Goodwill | 12,302 | 12,291 | ||||||
| Other intangible assets, net | 10,356 | 10,420 | ||||||
| Long-term restricted cash and investments | 264 | 264 | ||||||
| Long-term investments | — | 432 | ||||||
| Other non-current assets | 336 | 334 | ||||||
| Total other non-current assets | 23,258 | 23,741 | ||||||
| Total assets | $ | 79,463 | $ | 82,003 | ||||
| Liabilities and Equity: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 451 | $ | 388 | ||||
| Section 31 fees payable | 90 | 131 | ||||||
| Accrued salaries and benefits | 104 | 230 | ||||||
| Deferred revenue | 440 | 114 | ||||||
| Short-term debt | 2,376 | 2,493 | ||||||
| Margin deposits and guaranty funds | 52,354 | 55,150 | ||||||
| Other current liabilities | 191 | 111 | ||||||
| Total current liabilities | 56,006 | 58,617 | ||||||
| Non-current liabilities: | ||||||||
| Non-current deferred tax liability, net | 2,985 | 2,958 | ||||||
| Long-term debt | 3,872 | 3,871 | ||||||
| Accrued employee benefits | 415 | 430 | ||||||
| Other non-current liabilities | 361 | 337 | ||||||
| Total non-current liabilities | 7,633 | 7,596 | ||||||
| Total liabilities | 63,639 | 66,213 | ||||||
| Redeemable non-controlling interest | 37 | 36 | ||||||
| Equity: | ||||||||
| Intercontinental Exchange, Inc. shareholders’ equity: | ||||||||
| Common stock | 6 | 6 | ||||||
| Treasury stock, at cost | (346 | ) | (40 | ) | ||||
| Additional paid-in capital | 11,351 | 11,306 | ||||||
| Retained earnings | 5,171 | 4,789 | ||||||
| Accumulated other comprehensive loss | (427 | ) | (344 | ) | ||||
| Total Intercontinental Exchange, Inc. shareholders’ equity | 15,755 | 15,717 | ||||||
| Non-controlling interest in consolidated subsidiaries | 32 | 37 | ||||||
| Total equity | 15,787 | 15,754 | ||||||
| Total liabilities and equity | $ | 79,463 | $ | 82,003 | ||||
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 net income attributable to ICE common shareholders and adjusted diluted earnings per share 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):
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Three Months |
Three Months |
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| Net income attributable to ICE | $ | 502 | $ | 369 | ||||
| Add: Interactive Data and NYSE transaction and integration costs | 12 | 17 | ||||||
| Add: Amortization of acquisition-related intangibles | 65 | 77 | ||||||
| Add: Accrual relating to ongoing investigations and inquiries | 10 | — | ||||||
| Less: Cetip investment gain | (176 | ) | — | |||||
| Add/(Less): Income tax effect for the above items | 28 | (35 | ) | |||||
| Add: Deferred tax adjustment on acquisition-related intangibles | — | 13 | ||||||
| Adjusted net income attributable to ICE | $ | 441 | $ | 441 | ||||
| Diluted earnings per share attributable to ICE | $ | 0.84 | $ | 0.62 | ||||
| Adjusted diluted earnings per share attributable to ICE | $ | 0.74 | $ | 0.74 | ||||
About Intercontinental Exchange
Intercontinental Exchange (NYSE: ICE) operates the leading network of regulated exchanges and clearing houses, and is a provider of global data and listing services. ICE’s futures exchanges and clearing houses serve global commodity and financial markets, providing risk management and capital efficiency. The New York Stock Exchange is the world leader in capital raising and equities trading.
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 at www.intercontinentalexchange.com/terms-of-use.
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, 2016, as filed with the SEC on February 7, 2017. 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.
