Form 8-K Intercontinental Exchang For: Nov 02
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): November 2, 2017
Intercontinental Exchange, Inc.
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 001-36198 | 46-2286804 |
| (State or other jurisdiction | (Commission | (I.R.S. Employer |
| of incorporation) | File Number) | Identification Number) |
5660 New Northside Drive, Third Floor, Atlanta, Georgia 30328
(Address of Principal Executive Offices)(Zip Code)
Registrant's telephone number, including area code (770) 857-4700
_________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| q | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| q | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| q | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| q | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02. Results of Operations and Financial Condition.
On November 2, 2017, Intercontinental Exchange, Inc. (“ICE”) announced its financial results for the fiscal quarter ended September 30, 2017. A copy of ICE’s press release announcing such financial results is attached as Exhibit 99.1 to this Current Report on Form 8-K.
The information contained herein, including the attached press release, is furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934 except as may be expressly set forth by specific reference in such filing.
ICE makes references to non-GAAP financial information in the attached press release. A description of the non-GAAP financial information and a reconciliation of the non-GAAP financial information to the comparable GAAP financial measures are contained in the attached press release and ICE’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| 99.1 | Press Release dated November 2, 2017 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| INTERCONTINENTAL EXCHANGE, INC. | |
|
| |
| Date: November 2, 2017 | /s/ Scott A. Hill |
| Scott A. Hill | |
| Chief Financial Officer | |
Exhibit 99.1
Intercontinental Exchange Reports Strong Third Quarter 2017 GAAP Diluted EPS of $0.62 on Revenues of $1.1 billion, +6% y/y; Adjusted Diluted EPS of $0.73, +14% y/y
| ▪ | $1.1 billion of revenues in 3Q17, up 6% from the prior third quarter |
| ▪ | 2017 synergies now expected to be at least $70 million, up from $60 million previously |
| ▪ | Through October 31, 2017, $1.15 billion returned to shareholders via buybacks and dividends |
| ▪ | $1.2 billion share repurchase program authorized to begin January 1, 2018, 20% increase from prior authorization |
ATLANTA & NEW YORK, November 2, 2017 - Intercontinental Exchange (NYSE: ICE), a leading operator of global network of exchanges and clearing houses and provider of global data and listing services, today reported financial results for the third quarter of 2017. For the quarter ended September 30, 2017, consolidated net income attributable to ICE was $369 million on $1.1 billion of consolidated revenues less transaction-based expenses. Third quarter GAAP diluted earnings per share (EPS) were $0.62, up 9% year-over-year. On an adjusted basis, net income was $430 million in the third quarter, and diluted EPS were $0.73, up 14% year-over-year. 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.
“We are pleased to again deliver strong revenue and earnings growth while executing on our strategic objectives to serve our customers and shareholders," said ICE Chairman and CEO Jeffrey C. Sprecher. "We are investing to grow our trading, data and risk management solutions across geographies and asset classes and continue to see new ways to serve our customers across their workflow, from capital efficient clearing, to new trading and data products, to supporting regulatory compliance and connectivity needs. Our recent acquisitions demonstrate this focus and we look forward to leveraging our integrated offering to serve global markets as they evolve."
Scott A. Hill, ICE CFO, added: "Through the first nine months of the year we have grown revenues and are now on track to exceed our original 2017 synergy target even as we invest for continued growth in 2018. Our disciplined and balanced approach to shareholder value creation has enabled us to strategically invest in our business, while also returning over $1 billion to shareholders through buybacks and dividends so far in 2017."
Third Quarter 2017 GAAP Results
Third quarter 2017 consolidated revenues, less transaction-based expenses, were $1.1 billion. Trading and clearing segment revenues, less transaction-based expenses, were $523 million in the third quarter 2017, up 8% compared to the prior third quarter. Data and listings segment revenues were $620 million in the third quarter of 2017, up 4% compared to the prior third quarter, including data services revenues of $518 million, up 6% and listings revenues of $102 million, down 3% over the prior third quarter.
Consolidated operating expenses were $547 million for the third quarter of 2017. Consolidated operating income for the third quarter was $596 million and operating margin was 52%. The effective tax rate for the third quarter was 33%.
Unrestricted cash was $419 million and outstanding debt was $6.1 billion as of September 30, 2017.
Financial Guidance
| • | ICE's fourth quarter 2017 GAAP operating expenses are expected to be in a range of $540 million to $550 million and adjusted operating expenses(1) are expected to be in a range of $475 million to $485 million. |
| • | ICE's interest expense is expected to be $50 million in the fourth quarter. |
| • | ICE's adjusted effective tax rate is expected to be between 30-32% for the fourth quarter. |
| • | ICE's diluted share count for the fourth quarter is expected to be in the range of 585 million to 595 million weighted average shares outstanding. |
(1) The 2017 Non-GAAP adjusted operating expense excludes $65 million in amortization of acquisition-related intangibles for the fourth quarter of 2017. The GAAP operating expense forecast does not reflect an estimate of acquisition-related transaction and integration costs for the fourth quarter of 2017.
Earnings Conference Call Information
ICE will hold a conference call today, November 2, at 8:30 a.m. ET to review its second 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 1801297 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 2017 earnings has been scheduled for February 7, 2018 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
Consolidated Statements of Income
(In millions, except per share amounts)
(Unaudited)
| Nine Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenues: | ||||||||||||||||
| Transaction and clearing, net | $ | 2,373 | $ | 2,566 | $ | 758 | $ | 777 | ||||||||
| Data services | 1,559 | 1,463 | 518 | 489 | ||||||||||||
| Listings | 315 | 314 | 102 | 106 | ||||||||||||
| Other revenues | 148 | 131 | 54 | 44 | ||||||||||||
| Total revenues | 4,395 | 4,474 | 1,432 | 1,416 | ||||||||||||
| Transaction-based expenses: | ||||||||||||||||
| Section 31 fees | 275 | 290 | 92 | 94 | ||||||||||||
| Cash liquidity payments, routing and clearing | 635 | 823 | 197 | 244 | ||||||||||||
| Total revenues, less transaction-based expenses | 3,485 | 3,361 | 1,143 | 1,078 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Compensation and benefits | 710 | 708 | 231 | 236 | ||||||||||||
| Professional services | 94 | 101 | 30 | 32 | ||||||||||||
| Acquisition-related transaction and integration costs | 27 | 61 | 4 | 14 | ||||||||||||
| Technology and communication | 294 | 277 | 99 | 93 | ||||||||||||
| Rent and occupancy | 52 | 52 | 17 | 17 | ||||||||||||
| Selling, general and administrative | 117 | 83 | 38 | 31 | ||||||||||||
| Depreciation and amortization | 404 | 470 | 128 | 181 | ||||||||||||
| Total operating expenses | 1,698 | 1,752 | 547 | 604 | ||||||||||||
| Operating income | 1,787 | 1,609 | 596 | 474 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (137 | ) | (134 | ) | (47 | ) | (44 | ) | ||||||||
| Other income, net | 198 | 24 | 11 | 13 | ||||||||||||
| Other income (expense), net | 61 | (110 | ) | (36 | ) | (31 | ) | |||||||||
| Income before income tax expense | 1,848 | 1,499 | 560 | 443 | ||||||||||||
| Income tax expense | 537 | 409 | 185 | 93 | ||||||||||||
| Net income | $ | 1,311 | $ | 1,090 | $ | 375 | $ | 350 | ||||||||
| Net income attributable to non-controlling interest | (22 | ) | (20 | ) | (6 | ) | (6 | ) | ||||||||
| Net income attributable to Intercontinental Exchange, Inc. | $ | 1,289 | $ | 1,070 | $ | 369 | $ | 344 | ||||||||
| Earnings per share attributable to Intercontinental Exchange, Inc. common shareholders: | ||||||||||||||||
| Basic | $ | 2.18 | $ | 1.80 | $ | 0.63 | $ | 0.58 | ||||||||
| Diluted | $ | 2.17 | $ | 1.79 | $ | 0.62 | $ | 0.57 | ||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | 591 | 595 | 588 | 596 | ||||||||||||
| Diluted | 595 | 599 | 592 | 600 | ||||||||||||
| Dividend per share | $ | 0.60 | $ | 0.51 | $ | 0.20 | $ | 0.17 | ||||||||
Consolidated Balance Sheets
(In millions)
(Unaudited)
| As of | As of | |||||||
| September 30, 2017 | December 31, 2016 | |||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 419 | $ | 407 | ||||
| Short-term investments | 16 | 23 | ||||||
| Short-term restricted cash and investments | 762 | 679 | ||||||
| Customer accounts receivable, net | 897 | 777 | ||||||
| Margin deposits and guaranty funds | 52,401 | 55,150 | ||||||
| Prepaid expenses and other current assets | 744 | 97 | ||||||
| Total current assets | 55,239 | 57,133 | ||||||
| Property and equipment, net | 1,192 | 1,129 | ||||||
| Other non-current assets: | ||||||||
| Goodwill | 12,016 | 12,291 | ||||||
| Other intangible assets, net | 10,056 | 10,420 | ||||||
| Long-term restricted cash and investments | 264 | 264 | ||||||
| Long-term investments | — | 432 | ||||||
| Other non-current assets | 351 | 334 | ||||||
| Total other non-current assets | 22,687 | 23,741 | ||||||
| Total assets | $ | 79,118 | $ | 82,003 | ||||
| Liabilities and Equity: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 427 | $ | 388 | ||||
| Section 31 fees payable | 32 | 131 | ||||||
| Accrued salaries and benefits | 184 | 230 | ||||||
| Deferred revenue | 228 | 114 | ||||||
| Short-term debt | 1,197 | 2,493 | ||||||
| Margin deposits and guaranty funds | 52,401 | 55,150 | ||||||
| Other current liabilities | 131 | 111 | ||||||
| Total current liabilities | 54,600 | 58,617 | ||||||
| Non-current liabilities: | ||||||||
| Non-current deferred tax liability, net | 2,989 | 2,958 | ||||||
| Long-term debt | 4,865 | 3,871 | ||||||
| Accrued employee benefits | 264 | 430 | ||||||
| Other non-current liabilities | 381 | 337 | ||||||
| Total non-current liabilities | 8,499 | 7,596 | ||||||
| Total liabilities | 63,099 | 66,213 | ||||||
| Redeemable non-controlling interest | — | 36 | ||||||
| Equity: | ||||||||
| Intercontinental Exchange, Inc. shareholders’ equity: | ||||||||
| Common stock | 6 | 6 | ||||||
| Treasury stock, at cost | (833 | ) | (40 | ) | ||||
| Additional paid-in capital | 11,423 | 11,306 | ||||||
| Retained earnings | 5,718 | 4,789 | ||||||
| Accumulated other comprehensive loss | (322 | ) | (344 | ) | ||||
| Total Intercontinental Exchange, Inc. shareholders’ equity | 15,992 | 15,717 | ||||||
| Non-controlling interest in consolidated subsidiaries | 27 | 37 | ||||||
| Total equity | 16,019 | 15,754 | ||||||
| Total liabilities and equity | $ | 79,118 | $ | 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):
| Three Months
Ended September 30, 2017 | Three Months
Ended September 30, 2016 | |||||||
| Net income attributable to ICE | $ | 369 | $ | 344 | ||||
| Add: Interactive Data and NYSE transaction and integration costs | 3 | 7 | ||||||
| Add: Employee severance costs related to Creditex U.K. brokerage operations | — | 4 | ||||||
| Add: Creditex customer relationship intangible asset impairment | — | 33 | ||||||
| Add: Amortization of acquisition-related intangibles | 64 | 76 | ||||||
| Add: Accruals relating to ongoing investigations and inquiries | 4 | — | ||||||
| Less: Income tax effect for the above items | (22 | ) | (45 | ) | ||||
| Add: Deferred tax adjustments on acquisition-related intangibles | 12 | — | ||||||
| Less: Other tax adjustments | — | (34 | ) | |||||
| Adjusted net income attributable to ICE | $ | 430 | $ | 385 | ||||
| Diluted earnings per share attributable to ICE | $ | 0.62 | $ | 0.57 | ||||
| Adjusted diluted earnings per share attributable to ICE | $ | 0.73 | $ | 0.64 | ||||
About Intercontinental Exchange
Intercontinental Exchange (NYSE: ICE) is a Fortune 500 company that operates a leading network of global futures, equity and equity options exchanges, as well as global clearing and data services across financial and commodity markets. The New York Stock Exchange is the world leader in capital raising, listings 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.
SOURCE: Intercontinental Exchange
ICE-CORP
ICE Investor Relations Contact:
Warren Gardiner
+1 770 835 0114
ICE Media Contact:
Kelly Loeffler
+1 770 857 4726