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Intercontinental Exchange Reports Record Fourth Quarter 2014 Adjusted EPS From Continuing Operations Of $2.59, +30% Year Over Year - Record Full Year 2014 Adjusted EPS From Continuing Operations Of $9.63, +15% Year Over Year

Date 05/02/2015

Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, today reported record financial results for the fourth quarter and full year 2014. For the quarter ended December 31, 2014, consolidated net income attributable to ICE was $288 million on $800 million consolidated revenues less transaction-based expenses. On a GAAP basis, diluted earnings per share (EPS) in the fourth quarter were $2.54 and for the full year 2014 were $8.55.

ICE's operating results include amortization of acquisition-related intangibles, acquisition and integration related expenses, gain on our Euronext sale and our share of OCC's full year income that are not reflective of ICE's cash operations and core business performance. Excluding these items, net of tax, fourth quarter 2014 adjusted income from continuing operations was $294 million and adjusted diluted EPS from continuing operations were $2.59, an increase of 30% year over year. Please refer to the reconciliation of non-GAAP financial measures included in this press release for more information on adjusted income from continuing operations and adjusted diluted EPS from continuing operations.

“By focusing on the requirements of our customers and delivering on our integration milestones, we achieved record results in 2014,” said ICE Chairman and CEO Jeffrey C. Sprecher. “We strengthened our leadership position in growth markets, including global oil, natural gas and swaps clearing. During the year we also separated Euronext, seamlessly transitioned Liffe's markets to our exchanges and accelerated our synergy realization. We grew revenues at the New York Stock Exchange, increased market share in trading and again led in global capital raising with 129 initial public offerings. We remain focused on delivering growth and solid returns to our investors by putting the needs of our customers first.”

"Our strong cash generation and balance sheet enabled us to pursue strategic growth initiatives this year while returning nearly $1 billion of capital to shareholders through dividends and share buybacks," said ICE CFO, Scott A. Hill. "We recorded our 18th record year in Brent volume and earned nearly $100 million in CDS clearing revenues. We continued to expand our leadership in clearing through product innovation and strategic acquisitions. At the same time, we completed nearly $290 million, or over 50%, of our synergy target by the end of 2014. The strong momentum we have established entering 2015 coupled with continued execution of our strategic initiatives and further expense reductions during 2015 support our target of once again delivering double digit earnings growth, strong cash generation and meaningful capital returns."

Fourth Quarter 2014 Results

Fourth quarter 2014 consolidated revenues, less transaction-based expenses, were $800 million. Included in this amount are transaction and clearing revenues, less transaction-based expenses, of $479 million.

Consolidated data services fee revenues for the fourth quarter of 2014 were $174 million, consolidated listings revenues were $95 million and consolidated other revenues were $52 million.

Consolidated operating expenses were $400 million for the fourth quarter of 2014, including $27 million in integration and deal related expenses. Consolidated operating income for the fourth quarter was $400 million and operating margin was 50%. The effective tax rate for the fourth quarter was 29%.

Full Year 2014 Results

For the year ended December 31, 2014, consolidated revenues, less transaction-based expenses, were $3.1 billion. Included in this amount are transaction and clearing revenues, less transaction-based expenses, of $1.9 billion. Consolidated data services fee revenues for 2014 were $631 million, consolidated listings revenues were $367 million and consolidated other revenues were $210 million.

Consolidated 2014 income from continuing operations was $1.0 billion and diluted EPS from continuing operations were $8.46. Adjusted income from continuing operations was $1.1 billion and adjusted diluted EPS from continuing operations were $9.63 for the year, representing a 15% increase year over year. Please refer to the reconciliation of non-GAAP financial measure included in this press release.

Consolidated operating expenses were $1.6 billion for 2014, including $124 million in integration and deal related expenses. Consolidated operating income for 2014 was $1.4 billion and operating margin was 47%. The effective tax rate for the year was 29%.

Consolidated cash flows from operations were a record $1.5 billion for 2014. Operational capital expenditures were $91 million and capitalized software development costs totaled $78 million in 2014. Dividends paid during 2014 were $299 million and share repurchases totaled $645 million.

As of December 31, 2014, ICE had unrestricted cash of $652 million and $3.2 billion in outstanding debt, excluding $1.1 billion reserved for the repayment of the 2015 Eurobonds.

Financial Guidance and Additional Information

  • ICE expects full year 2015 combined Data Services and Listings revenue growth of approximately $100 million, excluding acquisitions.
  • ICE expects fourth quarter 2014 acquisitions to contribute $50 million to $55 million in incremental 2015 revenues and $40 million to $45 million in incremental 2015 expenses.
  • ICE expects a full year 2015 operating expense reduction of ~$90 million, including $110 million to $115 million of synergies and $20 million to $25 million of incremental investments, excluding fourth quarter 2014 acquisitions.
  • ICE expects first quarter and full year 2015 operating expenses, excluding amortization of acquisition-related intangibles, in the range of $335 million to $340 million and $1.335 billion to $1.355 billion, respectively. Full year operating expense guidance includes synergies, investments and acquisitions.
  • ICE expects first quarter and second quarter 2015 interest expense in the range of $23 million to $25 million, declining to the range of $20 million to $22 million in the second half of 2015.
  • ICE expects full year 2015 operational capital expenditures in the range of $165 million to $175 million. ICE expects full year 2015 real estate capital expenditures in the range of $70 million to $80 million.
  • ICE expects full year 2015 consolidated tax rate in the range of 28% to 31%.
  • ICE's diluted share count for the first quarter 2015 is expected to be in the range of 112 million to 113 million weighted average shares outstanding. Full year 2015 diluted share count is expected to be in the range of 112 million to 114 million weighted average shares outstanding, in each case including share repurchases through January 2015.
  • ICE declared a quarterly cash dividend of $0.65 per share for the first quarter of 2015 with a record date of March 17, 2015 and a payment date of March 31, 2015. The ex-dividend date is March 13, 2015.

Earnings Conference Call Information

ICE will hold a conference call today, February 5th, at 8:30 a.m. ET to review its fourth quarter and full year 2014 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 2502670 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.

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.

 

         
Consolidated Statements of Income
(In millions, except per share amounts)
         
    Year Ended December 31,   Three months ended December 31,
    2014   2013   2014   2013
Revenues:                        
Transaction and clearing fees, net   $ 3,013     $ 1,379     $ 811     $ 480  
Data services fees   631     229     174     100  
Listing fees   367     33     95     33  
Other revenues   210     75     52     41  
Total revenues   4,221     1,716     1,132     654  
Transaction-based expenses:                        
Section 31 fees   359     32     107     32  
Cash liquidity payments, routing and clearing   770     86     225     86  
Total revenues, less transaction-based expenses   3,092     1,598     800     536  
Operating expenses:                        
Compensation and benefits   592     302     144     109  
Technology and communication   188     63     53     27  
Professional services   181     54     31     31  
Rent and occupancy   78     39     17     16  
Acquisition-related transaction and integration costs   129     143     27     111  
Selling, general and administrative   143     51     39     23  
Depreciation and amortization   333     156     89     56  
Total operating expenses   1,644     808     400     373  
Operating income   1,448     790     400     163  
Other income (expense):                        
Interest expense   (96)
  (56)
  (23)
  (27)
Other income (expense), net   55     (230)
  35     (233)
Other income (expense), net   (41)
  (286)
  12     (260)
Income from continuing operations before income tax expense   1,407     504     412     (97)
Income tax expense   402     184     118     23  
Income (loss) from continuing operations   1,005     320     294     (120)
Income (loss) from discontinued operations, net of tax   11     (50)
      (50)
Net income (loss)   $ 1,016     $ 270     $ 294     $ (170)
Net income attributable to non-controlling interest   (35)
  (16)
  (6)
  (6)
Net income (loss) attributable to Intercontinental Exchange, Inc.   $ 981     $ 254     $ 288     $ (176)
Basic earnings (loss) per share attributable to Intercontinental Exchange, Inc. common shareholders:                        
Continuing operations   $ 8.50     $ 3.88     $ 2.56     $ (1.32)
Discontinued operations   0.10     (0.64)
      (0.53)
Basic earnings per share   $ 8.60     $ 3.24     $ 2.56     $ (1.85)
Diluted earnings (loss) per share attributable to Intercontinental Exchange, Inc. common shareholders:                        
Continuing operations   $ 8.46     $ 3.84     $ 2.54     $ (1.31)
Discontinued operations   0.09     (0.63)
      (0.52)
Diluted earnings per share   $ 8.55     $ 3.21     $ 2.54     $ (1.83)
Weighted average common shares outstanding:                        
Basic   114     78     113     95  
Diluted   115     79     113     96  
Dividend per share   $ 2.60     $ 0.65     $ 0.65     $ 0.65  

 

         

Consolidated Balance Sheets (in millions)

         
    December 31,   December 31,
    2014   2013
Assets:            
Current assets:            
Cash and cash equivalents   $ 652     $ 961  
Short-term investments   1,200     74  
Short-term restricted cash and investments   329     277  
Customer accounts receivable, net   471     546  
Margin deposits and guaranty funds   47,458     42,216  
Prepaid expenses and other current assets   135     195  
Total current assets   50,245     44,269  
Property and equipment, net   874     889  
Other non-current assets:            
Goodwill   8,535     9,189  
Other intangible assets, net   7,780     9,323  
Long-term restricted cash and investments   297     161  
Long-term investments   379     324  
Other non-current assets   169     267  
Total other non-current assets   17,160     19,264  
Total assets   $ 68,279     $ 64,422  
Liabilities and Equity:            
Current liabilities:            
Accounts payable and accrued liabilities   $ 337     $ 392  
Section 31 fees payable   137     85  
Accrued salaries and benefits   205     304  
Deferred revenue   69     58  
Short-term debt   2,042     1,135  
Margin deposits and guaranty funds   47,458     42,216  
Other current liabilities   291     131  
Total current liabilities   50,539     44,321  
Non-current liabilities:            
Non-current deferred tax liability, net   1,938     2,594  
Long-term debt   2,247     3,923  
Accrued employee benefits   516     412  
Other non-current liabilities   482     469  
Total non-current liabilities   5,183     7,398  
Total liabilities   55,722     51,719  
Redeemable non-controlling interest   165     322  
Equity:            
ICE shareholders’ equity:            
Common stock   1     1  
Treasury stock, at cost   (743)
  (53)
Additional paid-in capital   9,938     9,794  
Retained earnings   3,210     2,482  
Accumulated other comprehensive income (loss)   (46)
  125  
Total ICE shareholders’ equity   12,360     12,349  
Non-controlling interest in consolidated subsidiaries   32     32  
Total equity   12,392     12,381  
Total liabilities and equity   $ 68,279     $ 64,422  
                 

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 U.S. generally accepted accounting principles, or GAAP, results and the accompanying reconciliation, we believe that our presentation of these measures provides investors with greater transparency and supplemental data relating to our financial condition and results of operations. We strongly recommend that investors review the U.S. GAAP financial measures included in this press release and in our Annual Report on Form 10-K, including our consolidated financial statements and the notes thereto.

Adjusted income from continuing operations for the periods presented below are calculated by adding income from continuing operations, the adjustments described below, which are not reflective of our cash operations and core business performance, and the related income tax effect. The following table reconciles income from continuing operations to adjusted income from continuing operations and calculates adjusted earnings per share from continuing operations for the period presented below (in millions except per share amounts):

                         
            Three months   Three months
    Year ended   Year ended   ended   ended
    December 31,   December 31,   December 31,   December 31,
    2014   2013   2014   2013
Income (loss) from continuing operations   $ 1,005     $ 320     $ 294     $ (120)
Add: NYSE integration costs and banker fees   124     140     27     109  
Add: Amortization of acquisition-related intangibles   131     56     33     20  
Add: Cetip impairment loss       190         190  
Add: Early payoff of outstanding debt       51         51  
Add: Duplicate rent expenses       7          
Less: Net gain on sale of 6% remaining ownership in Euronext   (4)
      (4)
   
Less: Income from OCC equity investment   (26)
      (26)
   
Less: Income tax effect related to the items above   (91)
  (85)
  (24)
  (53)
Less: Net income from continuing operations attributable to non-controlling interest   (35)
  (16)
  (6)
  (6)
Adjusted income from continuing operations:   $ 1,104     $ 663     $ 294     $ 191  
                         
Earnings (loss) per share from continuing operations:                        
                         
Basic   $ 8.50     $ 3.88     $ 2.56     $ (1.32)
Diluted   $ 8.46     $ 3.84     $ 2.54     $ (1.31)
                         
Adjusted earnings per share from continuing operations:                        
                         
Adjusted basic   $ 9.67     $ 8.45     $ 2.60     $ 2.02  
Adjusted diluted   $ 9.63     $ 8.38     $ 2.59     $ 2.00  
                         
Weighted average common shares outstanding:                        
Basic   114     78     113     95  
Diluted   115     79     113     96