Enhanced Investments - Financial Portal

Published: 2022-11-03 07:30:25 ET

EX-99.1 2 tm2229405d1_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

Intercontinental Exchange Reports Strong Third Quarter 2022

• 3Q22 net revenues of $1.8 billion; +1% y/y; +3% y/y, constant currency (CC)*	Jeffrey C. Sprecher, ICE Chair & Chief Executive Officer, said, "We are pleased to report strong third quarter results that extend our track record of growth. Amidst a backdrop of continued geopolitical and macroeconomic uncertainty, our strong third quarter performance reflects the "all weather" nature of our business model. Our customers continue to rely on our mission-critical data, technology, and liquid markets through an array of macroeconomic environments. As we look to the balance of the year and beyond, we remain focused on driving innovation, helping to serve our customers' risk management needs and delivering value to our stockholders."

• 3Q22 GAAP diluted loss per share of $0.34, primarily due to net losses from Bakkt

• 3Q22 adj. diluted earnings per share (EPS) of $1.31

• 3Q22 operating income, +4% y/y; +7% y/y, CC. Adj. operating income +4% y/y; +6% y/y, CC

• 3Q22 operating margin of 50%, +164 basis points y/y; adj. operating margin of 60%, +176 basis points y/y

ATLANTA & NEW YORK, November 3, 2022 - Intercontinental Exchange (NYSE: ICE), a leading global provider of data, technology and market infrastructure, today reported financial results for the third quarter of 2022. For the quarter ended September 30, 2022, consolidated net loss attributable to ICE was $191 million on $1.8 billion of consolidated revenues, less transaction-based expenses. Third quarter GAAP diluted loss per share was $0.34, primarily due to net losses from Bakkt. Adjusted net income attributable to ICE was $733 million in the third quarter and adjusted diluted EPS was $1.31. 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 adjusted free cash flow.

Warren Gardiner, ICE Chief Financial Officer, added: "Through the first nine months of the year, we have grown revenues and operating income. This strong performance, including compounding growth in our recurring revenues across all three business segments is a testament to the power of our diverse business model. As we approach the end of 2022, we remain focused on extending our track record of growth and creating value for our stockholders."

*Constant currency (CC) percentage changes are calculated holding both the pound sterling and euro at the average exchange rate from 3Q21, 1.3784 and 1.1788, respectively.

Third Quarter 2022 Business Highlights

Third quarter consolidated net revenues were $1.8 billion, up 1% year-over-year including exchange net revenues of $1.0 billion, fixed income and data services revenues of $534 million and mortgage technology revenues of $276 million. Consolidated operating expenses were $898 million for the third quarter of 2022. On an adjusted basis, consolidated operating expenses were $727 million. Consolidated operating income for the third quarter was $913 million and the operating margin was 50%. On an adjusted basis, consolidated operating income for the third quarter was $1.1 billion and the adjusted operating margin was 60%.

$ (in millions)	Net Revenue		Op Margin			Adj Op Margin
	3Q22
Exchanges	$	1,001		70	%		72	%
Fixed Income and Data Services	$	534		37	%		45	%
Mortgage Technology	$	276		6	%		46	%
Consolidated	$	1,811		50	%		60	%

		3Q22		3Q21			% Chg
Recurring Revenue	$	930	$	888			5	%
Transaction Revenue, net	$	881	$	914			(4	)%

Exchanges Segment Results

Third quarter exchange net revenues were $1.0 billion. Exchange operating expenses were $301 million and on an adjusted basis, were $284 million in the third quarter. Segment operating income for the third quarter was $700 million and the operating margin was 70%. On an adjusted basis, operating income was $717 million and the adjusted operating margin was 72%.

$ (in millions)		3Q22		3Q21	% Chg		Const Curr⁽¹⁾
Revenue, net:
Energy	$	266	$	316	(16	)%	(13	)%
Ags and Metals		57		56	1	%	2	%
Financials⁽²⁾		122		93	30	%	46	%
Cash Equities and Equity Options		88		79	13	%	13	%
OTC and Other⁽³⁾		121		84	45	%	53	%
Data and Connectivity Services		219		208	6	%	6	%
Listings		128		123	3	%	3	%
Segment Revenue	$	1,001	$	959	4	%	8	%

Recurring Revenue	$	347	$	331	5	%	5	%
Transaction Revenue, net	$	654	$	628	4	%	9	%

(1) Net revenues in constant currency are calculated holding both the pound sterling and euro at the average exchange rate from 3Q21, 1.3784 and 1.1788, respectively.

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

(3) 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 $534 million. Fixed income and data services operating expenses were $337 million and adjusted operating expenses were $293 million in the third quarter. Segment operating income for the third quarter was $197 million and the operating margin was 37%. On an adjusted basis, operating income was $241 million and the adjusted operating margin was 45%.

$ (in millions)		3Q22		3Q21	% Chg		Const Curr⁽¹⁾
Revenue:
Fixed Income Execution	$	26	$	12	121	%	122	%
CDS Clearing		88		51	72	%	75	%
Fixed Income Data and Analytics		273		272	—	%	2	%
Other Data and Network Services		147		142	4	%	6	%
Segment Revenue	$	534	$	477	12	%	14	%

Recurring Revenue	$	420	$	414	1	%	3	%
Transaction Revenue	$	114	$	63	81	%	84	%

(1) Net revenues in constant currency are calculated holding both the pound sterling and euro at the average exchange rate from 3Q21, 1.3784 and 1.1788, respectively.

Mortgage Technology Segment Results

Third quarter mortgage technology revenues were $276 million. Mortgage technology operating expenses were $260 million and adjusted operating expenses were $150 million in the third quarter. Segment operating income for the third quarter was $16 million and the operating margin was 6%. On an adjusted basis, operating income was $126 million and the adjusted operating margin was 46%.

$ (in millions)		3Q22		3Q21	% Chg
Revenue:
Origination Technology	$	187	$	245	(24	)%
Closing Solutions		53		88	(39	)%
Data and Analytics		22		19	22	%
Other		14		14	(8	)%
Segment Revenue	$	276	$	366	(25	)%

Recurring Revenue	$	163	$	143	14	%
Transaction Revenue	$	113	$	223	(49	)%

Other Matters

•

Operating cash flow through the third quarter of 2022 was $2.5 billion and adjusted free cash flow was $2.1 billion.

•

Unrestricted cash was $1.2 billion and outstanding debt was $18.1 billion as of September 30, 2022.

•

The effective tax rate for the third quarter of 2022 was 47%, primarily due to net losses from Bakkt.

•

Through the third quarter of 2022, ICE repurchased $632 million of its common stock and paid $640 million in dividends. In connection with ICE's pending acquisition of Black Knight, on May 4, 2022 ICE suspended its share repurchases.

Updated Financial Guidance

•

ICE's fourth quarter 2022 GAAP operating expenses are expected to be in a range of $890 million to $900 million. Adjusted operating expenses⁽¹⁾ are expected to be in a range of $730 million to $740 million.

•

ICE's fourth quarter 2022 GAAP non-operating expense⁽²⁾ is expected to be in the range of $137 million to $142 million. Adjusted non-operating expense is expected to be in the range of $105 million to $110 million.

•

ICE's diluted share count for the fourth quarter is expected to be in the range of 558 million to 563 million weighted average shares outstanding.

(1) 4Q22 non-GAAP operating expenses exclude amortization of acquisition-related intangibles, pending Black Knight acquisition costs, and Ellie Mae integration costs.

(2) Non-operating income / expense includes interest income, interest expense and net other income. Non-GAAP non-operating expense excludes equity earnings from unconsolidated investees, net interest expense on pre-acquisition-related debt and costs associated with re-financing existing debt.

Earnings Conference Call Information

ICE will hold a conference call today, November 3, 2022, at 8:30 a.m. ET to review its third quarter 2022 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 844-200-6205 from the United States or 929-526-1599 from outside of the United States. Telephone participants are required to provide the participant entry number 047703 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 2022 earnings has been scheduled for February 2nd, 2023 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/investor-resources/supplemental-information/default.aspx

Consolidated Statements of Income

(In millions, except per share amounts

(Unaudited)

	Nine Months Ended September 30,						Three Months Ended September 30,
Revenues:	2022			2021			2022			2021
Exchanges	$	4,824		$	4,376		$	1,577		$	1,434
Fixed income and data services		1,555			1,403			534			477
Mortgage technology		880			1,061			276			366
Total revenues		7,259			6,840			2,387			2,277
Transaction-based expenses:
Section 31 fees		332			204			158			38
Cash liquidity payments, routing and clearing		1,403			1,330			418			437
Total revenues, less transaction-based expenses		5,524			5,306			1,811			1,802

Operating expenses:
Compensation and benefits		1,058			1,093			344			374
Professional services		101			124			32			43
Acquisition-related transaction and integration costs		81			42			19			14
Technology and communication		513			495			169			168
Rent and occupancy		63			61			22			20
Selling, general and administrative		166			163			54			52
Depreciation and amortization		768			759			258			253
Total operating expenses		2,750			2,737			898			924
Operating income		2,774			2,569			913			878
Other income/(expense):
Interest income		42			—			33			—
Interest expense		(440	)		(321	)		(176	)		(108	)
Other income/(expense), net		(1,132	)		1,341			(1,097	)		54
Other income/(expense), net		(1,530	)		1,020			(1,240	)		(54	)
Income/(loss) before income tax expense/(benefit)		1,244			3,589			(327	)		824
Income tax expense/(benefit)		186			1,049			(152	)		187
Net income/(loss)	$	1,058		$	2,540		$	(175	)	$	637
Net income attributable to non-controlling interest		(37	)		(9	)		(16	)		(4	)
Net income/(loss) attributable to Intercontinental Exchange, Inc.	$	1,021		$	2,531		$	(191	)	$	633

Earnings/(loss) per share attributable to Intercontinental Exchange, Inc. common stockholders:
Basic	$	1.83		$	4.50		$	(0.34	)	$	1.12
Diluted	$	1.82		$	4.48		$	(0.34	)	$	1.12
Weighted average common shares outstanding:
Basic		559			563			558			563
Diluted		561			565			560			566

Consolidated Balance Sheets

(In millions)

	As of			As of
	September 30, 2022			December 31, 2021
	(Unaudited)
Assets:
Current assets:
Cash and cash equivalents	$	1,183		$	607
Short-term restricted cash and cash equivalents		6,032			1,035
Cash and cash equivalent margin deposits and guaranty funds		156,789			145,936
Invested deposits, delivery contracts receivable and unsettled variation margin		7,902			4,493
Customer accounts receivable, net		1,248			1,208
Prepaid expenses and other current assets		558			1,021
Total current assets		173,712			154,300
Property and equipment, net		1,720			1,699
Other non-current assets:
Goodwill		21,075			21,123
Other intangible assets, net		13,210			13,736
Long-term restricted cash and cash equivalents		405			398
Other non-current assets		1,170			2,246
Total other non-current assets		35,860			37,503
Total assets	$	211,292		$	193,502

Liabilities and Equity:
Current liabilities:
Accounts payable and accrued liabilities	$	788		$	703
Section 31 fees payable		58			57
Accrued salaries and benefits		274			354
Deferred revenue		315			194
Short-term debt		7			1,521
Margin deposits and guaranty funds		156,789			145,936
Invested deposits, delivery contracts payable and unsettled variation margin		7,902			4,493
Other current liabilities		188			153
Total current liabilities		166,321			153,411
Non-current liabilities:
Non-current deferred tax liability, net		3,565			4,100
Long-term debt		18,113			12,397
Accrued employee benefits		189			200
Non-current operating lease liability		267			252
Other non-current liabilities		417			394
Total non-current liabilities		22,551			17,343
Total liabilities		188,872			170,754

Equity:
Intercontinental Exchange, Inc. stockholders’ equity:
Common stock		6			6
Treasury stock, at cost		(6,224	)		(5,520	)
Additional paid-in capital		14,269			14,069
Retained earnings		14,731			14,350
Accumulated other comprehensive loss		(403	)		(196	)
Total Intercontinental Exchange, Inc. stockholders’ equity		22,379			22,709
Non-controlling interest in consolidated subsidiaries		41			39
Total equity		22,420			22,748
Total liabilities and equity	$	211,292		$	193,502

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 adjusted 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,
	2022			2021			2022			2021			2022			2021			2022			2021
Total revenues, less transaction-based expenses	$	3,089		$	2,842		$	1,555		$	1,403		$	880		$	1,061		$	5,524		$	5,306
Operating expenses		904			977			1,029			1,010			817			750			2,750			2,737
Less: Amortization of acquisition-related intangibles		50			56			137			136			271			277			458			469
Less: Transaction and integration costs		—			12			—			—			79			28			79			40
Adjusted operating expenses	$	854		$	909		$	892		$	874		$	467		$	445		$	2,213		$	2,228
Operating income	$	2,185		$	1,865		$	526		$	393		$	63		$	311		$	2,774		$	2,569
Adjusted operating income	$	2,235		$	1,933		$	663		$	529		$	413		$	616		$	3,311		$	3,078
Operating margin		71	%		66	%		34	%		28	%		7	%		29	%		50	%		48	%
Adjusted operating margin		72	%		68	%		43	%		38	%		47	%		58	%		60	%		58	%

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,
	2022			2021			2022			2021			2022			2021			2022			2021
Total revenues, less transaction-based expenses	$	1,001		$	959		$	534		$	477		$	276		$	366		$	1,811		$	1,802
Operating expenses		301			330			337			338			260			256			898			924
Less: Amortization of acquisition-related intangibles		17			19			44			45			91			92			152			156
Less: Transaction and integration costs		—			2			—			—			19			11			19			13
Adjusted operating expenses	$	284		$	309		$	293		$	293		$	150		$	153		$	727		$	755
Operating income	$	700		$	629		$	197		$	139		$	16		$	110		$	913		$	878
Adjusted operating income	$	717		$	650		$	241		$	184		$	126		$	213		$	1,084		$	1,047
Operating margin		70	%		66	%		37	%		29	%		6	%		30	%		50	%		49	%
Adjusted operating margin		72	%		68	%		45	%		39	%		46	%		58	%		60	%		58	%

Adjusted Net Income Attributable to ICE and EPS

(In millions)

(Unaudited)

	Nine Months Ended September 30, 2022			Nine Months Ended September 30, 2021
Net income attributable to ICE	$	1,021		$	2,531
Add: Amortization of acquisition-related intangibles		458			469
Add: Transaction and integration costs		79			40
Add: Accelerated unamortized costs related to the early payoff of the June 2023 floating rate senior notes		—			4
Add: Impairment on Bakkt equity method investment		40			—
Add: Accrual relating to legal settlement		9			16
Add: Net interest expense on pre-acquisition-related debt		49			—
Add: Extinguishment of 2022 and 2023 Senior Notes		30			—
Less: Gain on sale and fair value adjustment of Euroclear equity investment and dividends received		(41	)		(94	)
Less: Gain on sale of Coinbase equity investment		—			(1,227	)
Less: Gain related to the settlement of an acquisition-related indemnification claim		—			(7	)
Add/(Less): Net losses/(income) from unconsolidated investees		1,112			(42	)
Add/(Less): Income tax effect for the above items		(478	)		216
Add/(Less): Deferred tax adjustments on acquisition-related intangibles		(3	)		196
Adjusted net income attributable to ICE	$	2,276		$	2,102

Basic earnings per share	$	1.83		$	4.50
Diluted earnings per share	$	1.82		$	4.48

Adjusted basic earnings per share	$	4.07		$	3.74
Adjusted diluted earnings per share	$	4.06		$	3.72

Basic weighted average common shares outstanding		559			563
Diluted weighted average common shares outstanding		561			565

Adjusted Net Income Attributable to ICE and EPS

(In millions)

(Unaudited)

	Three Months Ended September 30, 2022			Three Months Ended September 30, 2021
Net income/(loss) attributable to ICE	$	(191	)	$	633
Add: Amortization of acquisition-related intangibles		152			156
Add: Transaction and integration costs		19			13
Add: Accrual relating to legal settlement		—			16
Add: Net interest expense on pre-acquisition-related debt		31			—
Add: Accelerated unamortized costs related to the early payoff of the June 2023 floating rate senior notes		—			4
Add: Impairment on Bakkt equity method investment		40			—
Less: Gain on sale and fair value adjustment of Euroclear equity investment and dividends received		—			(64	)
Add/(Less): Net losses/(income) from unconsolidated investees		1,055			(8	)
Less: Income tax effect for the above items		(355	)		(38	)
Less: Deferred tax adjustments on acquisition-related intangibles		(18	)		(1	)
Adjusted net income attributable to ICE	$	733		$	711

Basic earnings/(loss) per share	$	(0.34	)	$	1.12
Diluted earnings/(loss) per share	$	(0.34	)	$	1.12

Adjusted basic earnings per share	$	1.31		$	1.26
Adjusted diluted earnings per share	$	1.31		$	1.26

Basic weighted average common shares outstanding		558			563
Diluted weighted average common shares outstanding		560			566

Adjusted Free Cash Flow Calculation

(In millions)

(Unaudited)

	Nine Months Ended September 30, 2022			Nine Months Ended September 30, 2021
Cash flow from operations	$	2,462		$	2,130
Less: Capital expenditures and capitalized software development costs		(325	)		(328	)
Add/(Less): Section 31 fees, net		(1	)		193
Adjusted free cash flow	$	2,136		$	1,995

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 at http://www.intercontinentalexchange.com/terms-of-use. 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, 2021, as filed with the SEC on February 3, 2022. 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

ICE Investor Relations Contact:

Katia Gonzalez

+1 678 981 3882

katia.gonzalez@ice.com

investors@ice.com

ICE Media Contact:

Josh King

+1 212 656 2490

josh.king@ice.com

media@ice.com