IntercontinentalExchange Group Reports Record 1Q14 Revenues And Adjusted Earnings - Adjusted Diluted EPS Of $2.60 And Adjusted Net Income Attributable To ICE Of $301 Million

IntercontinentalExchange Group (NYSE: ICE), the leading global network of exchanges and clearing houses, today reported record financial results for first quarter of 2014. For the quarter ended March 31, 2014, consolidated net income attributable to ICE was $262 million on consolidated revenues less transaction-based expenses of $932 million. On a GAAP basis, diluted earnings per share (EPS) in the first quarter were $2.27.

Certain items were included in ICE's operating results that were not indicative of the company's core business performance for the first quarter of 2014. Excluding these items, net of tax, first quarter 2014 adjusted net income attributable to ICE was $301 million and adjusted diluted EPS were $2.60. Adjusted figures exclude acquisition-related transaction and integration costs of $60 million and the related tax impact, primarily due to the NYSE Euronext integration. Please refer to the reconciliation of non-GAAP financial measures included in this press release for more information on adjusted net income attributable to ICE and adjusted diluted EPS.

ICE Chairman and CEO Jeffrey C. Sprecher said: “These strong results reflect our focus on delivering value for our customers and shareholders. The integration of our businesses is progressing well and the combined team is working to execute on operational and strategic objectives. While the economic environment and volatility remain muted, we are delivering new products and risk management services, as well as extending our footprint in Asia. We believe our strategic roadmap will enable us to continue to grow and establish new ways to serve our customers in 2014 and for years to come.”

Scott Hill, ICE CFO said: “ICE’s strong first quarter results were driven by the addition of new businesses, solid growth in our global agriculture complex and a record quarter for CDS clearing. We achieved record revenues and have taken actions that have already allowed us to realize over 40% of our expense synergy target relating to the NYSE Euronext acquisition, increasing the efficiency of our operations globally. We are on track to deliver on our total expense synergies, pay down debt to reach our targeted levels, divest non-strategic businesses and deliver solid returns to our shareholders."

First Quarter 2014 Results

First quarter 2014 consolidated revenues, less transaction-based expenses were $932 million. Included in this amount are net transaction and clearing revenues, less transaction-based expenses of $574 million.

Consolidated market data revenues for the first quarter of 2014 were $133 million and listings revenues were $91 million. During the first quarter of 2014, NYSE Group led globally in capital raising with $8.7 billion in total proceeds on 30 initial public offerings (IPOs). NYSE Group also led in technology IPOs with 10 IPO’s and $1.7 billion in proceeds. Consolidated other revenues were $134 million, which includes technology services, trading license fees, regulatory and listed company service fees, among others.

Consolidated operating expenses were $523 million for the first quarter of 2014, including $60 million in acquisition-related transaction and integration costs associated primarily with the NYSE Euronext integration. Consolidated operating income for the quarter was $409 million and operating margin was 44%. The effective tax rate for the first quarter was 28%.

Consolidated cash flow from operations was $519 million for the first quarter of 2014. Capital expenditures were $31 million and capitalized software development costs totaled $20 million in the quarter.

Unrestricted cash and short-term investments was $1.0 billion as of March 31, 2014 and the company had $4.9 billion in outstanding debt.

Financial Guidance and Additional Information

ICE declared a quarterly cash dividend of $0.65 per share for the second quarter of 2014 with a record date of June 16, 2014 and a payment date of June 30, 2014. The ex-dividend date will be June 12, 2014.
All financial guidance includes Euronext and excludes non-strategic NYSE technologies businesses that ICE plans to divest in the summer of 2014, which are included in discontinued operations except where noted.
ICE expects second quarter 2014 other revenue of $120 million to $130 million.

ICE expects second quarter 2014 consolidated expenses of $485 million to $495 million. For the ICE segment, ICE expects second quarter 2014 operating expenses of $390 million to $400 million. For the full year 2014, ICE segment operating expenses are expected to be $1.56 billion to $1.58 billion. The expense guidance is net of acquisition-related transaction and integration costs for all periods.
ICE expects operational capital expenditures and capitalized software of $60 million to $65 million for the second quarter and for the full year 2014 in the range of $200 million to $210 million. ICE expects an additional $70 million to $80 million in capital expenditures related to real estate for 2014.
ICE expects depreciation and amortization expense for the second quarter of 2014 in the range of $85 million to $90 million and for the full year 2014 in the range of $360 million to $370 million.
ICE's expects quarterly interest expense to be in the range of $24 million to $25 million for the remainder of 2014.
ICE's consolidated tax rate is expected to be in the range of 27% to 30% for the second quarter and full year 2014.
ICE's diluted share count for the second quarter 2014 is expected to be in the range of 115 million to 116 million weighted average shares outstanding and for 2014, diluted share count is expected to be in the range of 115 million to 117 million weighted average shares outstanding.

Earnings Conference Call Information

ICE will hold a conference call today, May 8, at 8:30 a.m. ET to review its first quarter 2014 financial results. A live audio webcast of the earnings call will be available on the company's website 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 2243978 and should 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 and open interest data in our new reporting format can be found at: http://ir.theice.com/supplemental.cfm


Consolidated Statements of Income
(In millions, except per share amounts)
(Unaudited)

	Three Months Ended March 31,
	2014			2013
Revenues:
Transaction and clearing fees, net	$	840		$	300
Market data fees	133			41
Listing fees	91			—
Other revenues	134			11
Total revenues	1,198			352
Transaction-based expenses:
Section 31 fees	71			—
Cash liquidity payments, routing and clearing	195			—
Total revenues, less transaction-based expenses	932			352

Operating expenses:
Compensation and benefits	199			66
Technology and communication	48			11
Professional services	64			8
Rent and occupancy	31			8
Acquisition-related transaction and integration costs	61			18
Selling, general and administrative	32			9
Depreciation and amortization	88			32
Total operating expenses	523			152
Operating income	409			200
Other income (expense):
Interest expense	(27		)	(10		)
Other income (expense), net	(2		)	1
Other expense, net	(29		)	(9		)
Income from continuing operations before income tax expense	380			191
Income tax expense	107			54
Income from continuing operations	273			137
Income from discontinued operations, net of tax	2			—
Net income	$	275		$	137
Net income attributable to non-controlling interest	(13		)	(2		)
Net income attributable to ICE	$	262		$	135

Basic earnings per share attributable to ICE common shareholders:
Continuing operations	$	2.27		$	1.86
Discontinued operations	$	0.01		$	—
Basic earnings per share	$	2.28		$	1.86
Diluted earnings per share attributable to ICE common shareholders:
Continuing operations	$	2.26		$	1.85
Discontinued operations	$	0.01		$	—
Diluted earnings per share	$	2.27		$	1.85
Weighted average common shares outstanding:
Basic	115			73
Diluted	116			73
Dividend per share	$	0.65		$	—

Consolidated Balance Sheets
(In millions)
(Unaudited)

	March 31, 2014			December 31, 2013
Assets:
Current assets:
Cash and cash equivalents	$	964		$	961
Short-term investments	57			74
Short-term restricted cash and investments	289			277
Customer accounts receivable, net	544			482
Margin deposits and guaranty funds	42,826			42,216
Prepaid expenses and other current assets	574			249

Total current assets	45,254			44,259
Property and equipment, net	898			891
Other non-current assets:
Goodwill	9,482			9,501
Other intangible assets, net	9,410			9,404
Long-term restricted cash	212			161
Long-term investments	384			324
Other non-current assets	281			278
Total other non-current assets	19,769			19,668
Total assets	$	65,921		$	64,818

Liabilities and Equity:
Current liabilities:
Accounts payable and accrued liabilities	$	357		$	343
Accrued salaries and benefits	192			301
Deferred revenue	348			48
Short-term debt	1,297			1,135
Margin deposits and guaranty funds	42,826			42,216
Other current liabilities	383			299
Total current liabilities	45,403			44,342
Non-current liabilities:
Non-current deferred tax liability, net	2,809			2,771
Long-term debt	3,584			3,923
Accrued employee benefits	392			412
Other non-current liabilities	497			433
Total non-current liabilities	7,282			7,539
Total liabilities	52,685			51,881
Redeemable non-controlling interest	290			322

Equity:
ICE shareholders' equity:
Common Stock	1			1
Treasury stock, at cost	(89		)	(53		)
Additional paid-in capital	9,835			9,794
Retained earnings	2,704			2,482
Accumulated other comprehensive income	464			359
Total ICE shareholders' equity	12,915			12,583
Non-controlling interest in consolidated subsidiaries	31			32
Total equity	12,946			12,615
Total liabilities and equity	$	65,921		$	64,818