- $2.91 Adjusted Diluted EPS from Continuing Operations, +24% y/y
- $816MM Consolidated Revenues, less Transaction-based Expenses, +10% y/y
- $323MM Adjusted Net Income from Continuing Operations Attributable to ICE, +21% y/y
- $290MM Capital Return to Shareholders
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, today reported financial results for the third quarter of 2015. For the quarter ended September 30, 2015, consolidated net income attributable to ICE was $306 million on $816 million of consolidated revenues less transaction-based expenses. On a GAAP basis, diluted earnings per share (EPS) in the third quarter were $2.76.
ICE's operating results include amortization of acquisition-related intangibles, acquisition and integration-related expenses and other adjustments that are not reflective of ICE's cash operations or core business performance. Excluding these items, net of tax, third quarter 2015 adjusted net income from continuing operations was $323 million and adjusted diluted EPS from continuing operations were $2.91, an increase of 24% over the prior third quarter. Please refer to the reconciliation of non-GAAP financial measures included in this press release for more information on adjusted net income from continuing operations and adjusted diluted EPS from continuing operations.
"Our third quarter performance represents our fourth consecutive quarter of double-digit earnings growth. This was driven by strong performance in our commodities, cash equities, data services and listings businesses,” said ICE Chairman and CEO Jeffrey C. Sprecher. "Our focus on our customers and on our strategic objectives is providing near-term and long-term growth across all of our businesses.”
Scott A. Hill, ICE CFO, said: “We drove growth through a range of organic initiatives, while continuing to reduce expenses and expand operating margins. We also generated strong cash flow and maintained a strong balance sheet with low leverage which enabled us to return $847 million to shareholders through dividends and share repurchases during the first nine months of the year."
Third Quarter 2015 Results
Third quarter 2015 consolidated revenues, less transaction-based expenses, increased 10% to$816 million compared to the same period in 2014. Included in this amount are $460 million of transaction and clearing revenues, less transaction-based expenses.
Consolidated data services revenues for the third quarter of 2015 were a record $209 million, up 24% year-over-year and listings revenues were $101 million, up 10% compared to the prior third quarter. Consolidated other revenues were $46 million.
Consolidated operating expenses were $376 million for the third quarter of 2015, including $6 million in NYSE integration costs. Consolidated operating income for the third quarter was $440 million and operating margin was 54%. The effective tax rate for the third quarter was 27%.
First Nine Months of 2015 Results
Consolidated revenues, less transaction-based expenses, for the first nine months of the year increased 7% to $2.5 billion compared to the same period in 2014. Included in this amount are $1.4 billion of transaction and clearing revenues, less transaction-based expenses.
Consolidated data services revenues for the first nine months of 2015 were a record $614 million, up 22% year-over-year and listings revenues were a record $303 million, up 11% compared to the prior period. Consolidated other revenues were $132 million.
Consolidated operating expenses were $1.1 billion for the first nine months of 2015, including $31 million in NYSE integration costs. Consolidated operating income for the first nine months of 2015 was $1.3 billion and operating margin was 54%. The effective tax rate for the first nine months was 27%.
Consolidated cash flows from operations were $890 million for the first nine months of 2015. Operational capital expenditures were $70 million and capitalized software development costs totaled $67 million.
Unrestricted cash and short-term investments were $708 million and outstanding debt was $3.5 billion as of September 30, 2015.
Financial Guidance
- ICE expects fourth quarter 2015 adjusted operating expenses in the range of $330 million to$335 million.
- ICE's diluted share count for the fourth quarter and full year 2015 is expected to be in the range of 110 million to 112 million weighted average shares outstanding, including share repurchases through October 2015 and excluding any shares issued for the Interactive Data Corporation acquisition (IDC), which is expected to close in December 2015 or January 2016.
Earnings Conference Call Information
ICE will hold a conference call today, October 28, at 8:30 a.m. ET to review its third quarter 2015 financial results and to discuss the pending acquisition of IDC. 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 andCanada. Telephone participants are required to provide the participant entry number 1040432 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) (Unaudited) | ||||||||||||||
| Nine Months Ended | Three Months Ended | |||||||||||||
| September 30, | September 30, | |||||||||||||
| Revenues: | 2015 | 2014 | 2015 | 2014 | ||||||||||
| Transaction and clearing fees, net | $ | 2,331 | $ | 2,202 | $ | 795 | $ | 712 | ||||||
| Data services fees | 614 | 502 | 209 | 170 | ||||||||||
| Listing fees | 303 | 272 | 101 | 92 | ||||||||||
| Other revenues | 132 | 113 | 46 | 36 | ||||||||||
| Total revenues | 3,380 | 3,089 | 1,151 | 1,010 | ||||||||||
| Transaction-based expenses: | ||||||||||||||
| Section 31 fees | 263 | 250 | 92 | 89 | ||||||||||
| Cash liquidity payments, routing and clearing | 654 | 547 | 243 | 176 | ||||||||||
| Total revenues, less transaction-based expenses | 2,463 | 2,292 | 816 | 745 | ||||||||||
| Operating expenses: | ||||||||||||||
| Compensation and benefits | 445 | 448 | 150 | 144 | ||||||||||
| Technology and communication | 147 | 135 | 49 | 45 | ||||||||||
| Professional services | 102 | 150 | 37 | 47 | ||||||||||
| Rent and occupancy | 45 | 61 | 14 | 19 | ||||||||||
| Acquisition-related transaction and integration costs | 34 | 102 | 8 | 40 | ||||||||||
| Selling, general and administrative | 82 | 104 | 24 | 37 | ||||||||||
| Depreciation and amortization | 276 | 244 | 94 | 83 | ||||||||||
| Total operating expenses | 1,131 | 1,244 | 376 | 415 | ||||||||||
| Operating income | 1,332 | 1,048 | 440 | 330 | ||||||||||
| Other income (expense): | ||||||||||||||
| Interest expense | (67 | ) | (73 | ) | (21 | ) | (22 | ) | ||||||
| Other income (expense), net | (3 | ) | 20 | 4 | 5 | |||||||||
| Other expense, net | (70 | ) | (53 | ) | (17 | ) | (17 | ) | ||||||
| Income from continuing operations before income tax expense | 1,262 | 995 | 423 | 313 | ||||||||||
| Income tax expense | 340 | 284 | 113 | 90 | ||||||||||
| Income from continuing operations | 922 | 711 | 310 | 223 | ||||||||||
| Income (loss) from discontinued operations, net of tax | — | 11 | — | (10 | ) | |||||||||
| Net income | $ | 922 | $ | 722 | $ | 310 | $ | 213 | ||||||
| Net income attributable to non-controlling interest | (18 | ) | (29 | ) | (4 | ) | (7 | ) | ||||||
| Net income attributable to Intercontinental Exchange, Inc. | $ | 904 | $ | 693 | $ | 306 | $ | 206 | ||||||
| Basic earnings (loss) per share attributable to Intercontinental Exchange, Inc. common shareholders: | ||||||||||||||
| Continuing operations | $ | 8.13 | $ | 5.96 | $ | 2.77 | $ | 1.90 | ||||||
| Discontinued operations | — | 0.09 | — | (0.09 | ) | |||||||||
| Basic earnings per share | $ | 8.13 | $ | 6.05 | $ | 2.77 | $ | 1.81 | ||||||
| Diluted earnings (loss) per share attributable to Intercontinental Exchange, Inc. common shareholders: | ||||||||||||||
| Continuing operations | $ | 8.10 | $ | 5.93 | $ | 2.76 | $ | 1.89 | ||||||
| Discontinued operations | — | 0.09 | — | (0.09 | ) | |||||||||
| Diluted earnings per share | $ | 8.10 | $ | 6.02 | $ | 2.76 | $ | 1.80 | ||||||
| Weighted average common shares outstanding: | ||||||||||||||
| Basic | 111 | 115 | 110 | 114 | ||||||||||
| Diluted | 112 | 115 | 111 | 114 | ||||||||||
| Dividend per share | $2.15 | $1.95 | $0.75 | $0.65 | ||||||||||
| Consolidated Balance Sheets | ||||||
| (In millions) | ||||||
| (Unaudited) | ||||||
| As of | As of | |||||
| September 30, 2015 | December 31, 2014 | |||||
| Assets: | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $687 | $652 | ||||
| Short-term investments | 21 | 1,200 | ||||
| Short-term restricted cash and investments | 358 | 329 | ||||
| Customer accounts receivable | 490 | 445 | ||||
| Margin deposits and guaranty funds | 46,308 | 47,458 | ||||
| Prepaid expenses and other current assets | 188 | 135 | ||||
| Total current assets | 48,052 | 50,219 | ||||
| Property and equipment, net | 904 | 874 | ||||
| Other non-current assets: | ||||||
| Goodwill | 8,507 | 8,535 | ||||
| Other intangible assets, net | 7,653 | 7,780 | ||||
| Long-term restricted cash and investments | 255 | 297 | ||||
| Long-term investments | 253 | 379 | ||||
| Other non-current assets | 232 | 169 | ||||
| Total other non-current assets | 16,900 | 17,160 | ||||
| Total assets | $65,856 | $68,253 | ||||
| Liabilities and Equity: | ||||||
| Current liabilities: | ||||||
| Accounts payable and accrued liabilities | $297 | $311 | ||||
| Section 31 fees payable | 31 | 137 | ||||
| Accrued salaries and benefits | 130 | 205 | ||||
| Deferred revenue | 186 | 69 | ||||
| Short-term debt | 1,253 | 2,042 | ||||
| Margin deposits and guaranty funds | 46,308 | 47,458 | ||||
| Other current liabilities | 253 | 291 | ||||
| Total current liabilities | 48,458 | 50,513 | ||||
| Non-current liabilities: | ||||||
| Non-current deferred tax liability, net | 1,870 | 1,938 | ||||
| Long-term debt | 2,247 | 2,247 | ||||
| Accrued employee benefits | 476 | 516 | ||||
| Other non-current liabilities | 395 | 482 | ||||
| Total non-current liabilities | 4,988 | 5,183 | ||||
| Total liabilities | 53,446 | 55,696 | ||||
| Redeemable non-controlling interest | 40 | 165 | ||||
| Equity: | ||||||
| Intercontinental Exchange, Inc. shareholders’ equity: | ||||||
| Preferred stock | — | — | ||||
| Common stock | 1 | 1 | ||||
| Treasury stock, at cost | (1,390 | ) | (743 | ) | ||
| Additional paid-in capital | 10,057 | 9,938 | ||||
| Retained earnings | 3,863 | 3,210 | ||||
| Accumulated other comprehensive loss | (191 | ) | (46 | ) | ||
| Total Intercontinental Exchange, Inc. shareholders’ equity | 12,340 | 12,360 | ||||
| Non-controlling interest in consolidated subsidiaries | 30 | 32 | ||||
| Total equity | 12,370 | 12,392 | ||||
| Total liabilities and equity | $65,856 | $68,253 | ||||
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 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 Quarterly Report on Form 10-Q, including our consolidated financial statements and related notes.
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 net income from continuing operations and calculates adjusted earnings per share from continuing operations for the period presented below (in millions except per share amounts):
| Nine Months Ended | Three Months Ended | |||||||
| September 30, 2015 | September 30, 2015 | |||||||
| Income from continuing operations | $ | 922 | $ | 310 | ||||
| Add: NYSE integration costs | 31 | 6 | ||||||
| Add: Amortization of acquisition-related intangibles | 99 | 33 | ||||||
| Add: Litigation accruals | 15 | (4 | ) | |||||
| Less: Income tax effect for the items above | (52 | ) | (18 | ) | ||||
| Less: Other tax adjustments | (7 | ) | — | |||||
| Less: Net income from continuing operations attributable to non-controlling interest | (18 | ) | (4 | ) | ||||
| Adjusted net income from continuing operations | $ | 990 | $ | 323 | ||||
| Earnings per share from continuing operations: | ||||||||
| Basic | $ | 8.13 | $ | 2.77 | ||||
| Diluted | $ | 8.10 | $ | 2.76 | ||||
| Adjusted earnings per share from continuing operations: | ||||||||
| Adjusted basic | $ | 8.91 | $ | 2.93 | ||||
| Adjusted diluted | $ | 8.87 | $ | 2.91 | ||||
| Weighted average common shares outstanding: | ||||||||
| Basic | 111 | 110 | ||||||
| Diluted | 112 | 111 | ||||||
About Intercontinental Exchange
Intercontinental Exchange (NYSE: ICE) operates the leading network of regulated exchanges and clearing houses. 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 atwww.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, 2014, as filed with the SEC on February 5, 2015. We caution you not to place undo 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.
