Form 8-K Intercontinental Exchang For: Feb 07
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 or 15(d) of THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 7, 2019
Intercontinental Exchange, Inc.
(Exact Name of Registrant as Specified in Charter)
| Delaware | 001-36198 | 46-2286804 |
(State
or other jurisdiction |
(Commission File No.) |
(IR.S.
Employer |
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 registrants under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | 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 February 7, 2019, Intercontinental Exchange, Inc. issued a press release announcing its financial results for the fiscal quarter and year ended December 31, 2018. A copy of the 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.
Intercontinental Exchange 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 Intercontinental Exchange’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits |
| 99.1 | Press Release dated February 7, 2019. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized.
| INTERCONTINENTAL EXCHANGE, INC. | ||
| /s/ Scott A. Hill | ||
| Scott A. Hill | ||
| Chief Financial Officer |
Date: February 7, 2019
Exhibit 99.1
Intercontinental Exchange Reports Fourth Quarter 2018
| • Fourth quarter revenues of $1.3 billion, +14% y/y |
Jeffrey C. Sprecher, ICE Chairman & Chief Executive Officer, said,
“2018 marked our 13th consecutive year of record revenues - a track record directly attributable to customer demand for our risk management solutions and the investments we've made to enhance our technology, expand our content and broaden our distribution. As we look to 2019, we remain focused on bringing mission-critical solutions to our customers and delivering value to our stockholders." | |
| • GAAP diluted EPS of $1.07 | ||
| • Adj. diluted EPS of $0.94, +25% y/y | ||
| • Operating margin of 52%; Adj. operating margin of 58% | ||
| • Nearly $1.8 billion returned to stockholders in 2018, +23% y/y | ||
ATLANTA & NEW YORK, February 7, 2019 - Intercontinental Exchange (NYSE: ICE), a leading operator of global exchanges and clearing houses and provider of data and listing services, today reported financial results for the fourth quarter and full year of 2018. For the quarter ended December 31, 2018, consolidated net income attributable to ICE was $611 million on $1.3 billion of consolidated revenues less transaction-based expenses. Fourth quarter GAAP diluted earnings per share (EPS) were $1.07. Adjusted net income attributable to ICE was $536 million in the fourth quarter and adjusted diluted EPS were $0.94, up 25% year-over-year.
For the full year of 2018 consolidated net income attributable to ICE was $2.0 billion on $5.0 billion of consolidated revenues less transaction-based expenses. Full year 2018 GAAP diluted EPS were $3.43. On an adjusted basis, net income attributable to ICE for the year was $2.1 billion and adjusted diluted EPS were $3.59, up 21% year-over-year.
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, organic data revenue and free cash flow.
Scott A. Hill, ICE Chief Financial Officer, added: "In addition to record revenues, we generated record cash flows in 2018, enabling us to return nearly $1.8 billion in capital to stockholders, more than any year in our history. As we enter 2019, we remain committed to prudent capital management and a disciplined approach to investment to support continued growth and to enhance long-term stockholder value."
Fourth Quarter and Full Year 2018 Business Highlights
| $ (in millions) | Net Revenue | Op Margin | Adj Op Margin | Net Revenue | Op Margin | Adj Op Margin | ||||||||||||||||||
| Full Year 2018 | 4Q18 | |||||||||||||||||||||||
| Data and Listings | $ | 2,559 | 42 | % | 51 | % | $ | 651 | 42 | % | 51 | % | ||||||||||||
| Trading and Clearing | $ | 2,420 | 62 | % | 66 | % | $ | 657 | 61 | % | 65 | % | ||||||||||||
| Consolidated | $ | 4,979 | 52 | % | 58 | % | $ | 1,308 | 52 | % | 58 | % | ||||||||||||
Fourth quarter consolidated net revenues were $1.3 billion, up 14% year-over-year. Data and listings revenues in the fourth quarter were $651 million and trading and clearing net revenues were $657 million, up 4% and 27% year-over-year, respectively. Consolidated operating expenses were $632 million for the fourth quarter of 2018. On an adjusted basis, consolidated operating expenses were $553 million. Consolidated operating income for the fourth quarter was $676 million and the operating margin was 52%. On an adjusted basis, consolidated operating income for the fourth quarter was $755 million and the adjusted operating margin was 58%.
Full year 2018 consolidated net revenues were $5.0 billion, up 7% year-over-year. Full year 2018 data and listings revenues were $2.6 billion and trading and clearing net revenues were $2.4 billion, up 2% and 14% year-over-year, respectively. Consolidated operating expenses were $2.4 billion for 2018. On an adjusted basis, consolidated operating expenses were $2.1 billion. Consolidated operating income for the year was $2.6 billion and the operating margin was 52%. On an adjusted basis, consolidated operating income for the year was $2.9 billion and the adjusted operating margin was 58%.
Data and Listings Segment Results
Fourth quarter data and listings revenues were $651 million, including data revenues of $539 million, up 3% year-over-year, negatively impacted by the divestiture of Trayport in the fourth quarter of 2017, and listings revenues of $112 million, up 8% year-over-year. On an organic, constant currency basis(1), segment revenues were up 6% with data revenues up 6% year-over-year and listings revenues up 8% year-over-year. Data and listings operating expenses were $376 million and on an adjusted basis, were $321 million in the fourth quarter. Segment operating income for the fourth quarter was $275 million and the operating margin was 42%. On an adjusted basis, operating income was $330 million and the adjusted operating margin was 51%.
| $ (in millions) | 4Q18 | 4Q17 | % Chg | Organic | Organic Const | |||||||||||||||
| Revenue: | ||||||||||||||||||||
| Pricing and Analytics | $ | 264 | $ | 248 | 6 | % | 7 | % | 7 | % | ||||||||||
| Exchange Data and Feeds | 174 | 160 | 9 | % | 7 | % | 7 | % | ||||||||||||
| Desktops and Connectivity | 101 | 117 | (13 | )% | — | 1 | % | |||||||||||||
| Data Total | 539 | 525 | 3 | % | 6 | % | 6 | % | ||||||||||||
| Listings | 112 | 104 | 8 | % | 8 | % | 8 | % | ||||||||||||
| Segment Revenue | $ | 651 | $ | 629 | 4 | % | 6 | % | 6 | % | ||||||||||
(1) Net revenues in constant currency are calculated holding both the pound sterling and euro at the average exchange rate from 4Q17, 1.3279 and 1.1779, respectively. References to organic growth excludes businesses that have been acquired, divested or discontinued that significantly impact the comparable periods. For 4Q18 and 4Q17, $6 million and $21 million of data revenues were excluded from organic growth, respectively.
Full year 2018 data and listings revenues were $2.6 billion, including data revenues of $2.1 billion, up 1% year-over-year, negatively impacted by the divestiture of Trayport in the fourth quarter of 2017, and listings revenues of $444 million, up 4% year-over-year, negatively impacted by the sale of NYSE Governance Services in the second quarter of 2017. On an organic, constant currency basis(1), segment revenues were up 5% with data revenues up 5% year-over-year and listings revenues up 6% year-over-year. Data and listings operating expenses were $1.5 billion and on an adjusted basis, were $1.2 billion for the year. Segment operating income for the full year was $1.1 billion and the operating margin was 42%. On an adjusted basis, operating income was $1.3 billion and the adjusted operating margin was 51%.
| $ (in millions) | FY18 | FY17 | % Chg | Organic | Organic Const Curr(1) | |||||||||||||||
| Revenue: | ||||||||||||||||||||
| Pricing and Analytics | $ | 1,043 | $ | 970 | 7 | % | 7 | % | 7 | % | ||||||||||
| Exchange Data and Feeds | 670 | 632 | 6 | % | 5 | % | 5 | % | ||||||||||||
| Desktops and Connectivity | 402 | 482 | (17 | )% | 2 | % | 2 | % | ||||||||||||
| Data Total | 2,115 | 2,084 | 1 | % | 5 | % | 5 | % | ||||||||||||
| Listings | 444 | 426 | 4 | % | 6 | % | 6 | % | ||||||||||||
| Segment Revenue | $ | 2,559 | $ | 2,510 | 2 | % | 6 | % | 5 | % | ||||||||||
(1) Net revenues in constant currency are calculated holding both the pound sterling and euro at the average exchange rate from 2017, $1.2890 and $1.1297, respectively. References to organic growth excludes businesses that have been acquired, divested or discontinued that significantly impact the comparable periods. For 2018, $39 million of data revenues were excluded from organic growth. For 2017, $116 million of data revenues and $8 million of listings revenues were excluded from organic growth.
Trading and Clearing Segment Results
Fourth quarter trading and clearing net revenues were $657 million, up 27% from one year ago. Trading and clearing operating expenses were $256 million and adjusted operating expenses were $232 million in the fourth quarter. Segment operating income for the fourth quarter was $401 million and the operating margin was 61%. On an adjusted basis, operating income was $425 million and the adjusted operating margin was 65%.
| $ (in millions) | 4Q18 | 4Q17 | % Chg | |||||||||
| Revenue, net: | ||||||||||||
| Energy | $ | 257 | $ | 227 | 13 | % | ||||||
| Ags and Metals | 54 | 49 | 13 | % | ||||||||
| Financials(1) | 92 | 72 | 28 | % | ||||||||
| Cash Equities and Equity Options | 93 | 70 | 35 | % | ||||||||
| Fixed Income and Credit(2) | 83 | 32 | 152 | % | ||||||||
| OTC and Other Transactions(3) | 13 | 13 | — | |||||||||
| Other Revenue(4) | 65 | 54 | 21 | % | ||||||||
| Segment Revenue | $ | 657 | $ | 517 | 27 | % | ||||||
(1) Financials include interest rates and other financial futures and options.
(2) Fixed income and credit includes fixed income execution, CDS execution and clearing and ICE Mortgage Services.
(3) OTC & other transactions include physical energy.
(4) Other revenue includes 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, exchange member fees, and agriculture grading and certification fees.
| • | Energy futures and options revenue in the fourth quarter increased 13% year-over-year driven by a 10% increase in average daily volume (ADV) and a 1% increase in rate per contract (RPC). |
| • | Ags and metals futures and options revenue in the fourth quarter increased 13% year-over-year driven by a 12% increase in ADV and partially offset by a 1% decrease in RPC. |
| • | Financials futures and options revenue in the fourth quarter increased 28% year-over-year driven by a 35% increase in ADV and partially offset by a 5% decrease in RPC. |
| • | U.S. cash equities and equity options revenue in the fourth quarter increased 35% year-over-year driven by a 45% increase in U.S. cash equities ADV and a 44% increase in equity options ADV. |
| • | Fixed income and credit revenue in the fourth quarter increased 152% year-over-year driven by a 25% increase in CDS clearing revenue and the addition of BondPoint, TMC Bonds and MERS. |
ADV (lots in thousands) | RPC | |||||||||||||||
| 4Q18 | % Chg | 4Q18 | % Chg | |||||||||||||
| Energy | 2,900 | 10 | % | $ | 1.38 | 1 | % | |||||||||
| Ags & Metals | 379 | 12 | % | $ | 2.24 | (1 | )% | |||||||||
| Financials | 2,933 | 35 | % | $ | 0.48 | (5 | )% | |||||||||
| Interest Rates | 2,456 | 37 | % | $ | 0.37 | (3 | )% | |||||||||
| Other Financials | 477 | 23 | % | $ | 1.02 | (4 | )% | |||||||||
| Total Futures and Options | 6,212 | 21 | % | $ | 1.00 | (6 | )% | |||||||||
| Cash Equities | 2,106 | 45 | % | $ | 0.048 | (7 | )% | |||||||||
| Equity Options | 3,866 | 44 | % | $ | 0.12 | (6 | )% | |||||||||
The fourth quarter of 2018 included 64 trading days for commodities and other financials, 63 trading days for cash equities and equity options and 65 trading days for interest rates. The fourth quarter of 2017 included 63 trading days for commodities, other financials, cash equities and equity options and 64 trading days for interest rates.
Full year 2018 trading and clearing net revenues were $2.4 billion, up 14% from one year ago. Trading and clearing operating expenses were $911 million and adjusted operating expenses were $824 million in 2018. Segment operating income for the year was $1.5 billion and the operating margin was 62%. On an adjusted basis, operating income was $1.6 billion and the adjusted operating margin was 66%.
| $ (in millions) | 2018 | 2017 | % Chg | |||||||||
| Revenue, net: | ||||||||||||
| Energy | $ | 965 | $ | 909 | 6 | % | ||||||
| Ags and Metals | 251 | 216 | 16 | % | ||||||||
| Financials(1) | 354 | 326 | 9 | % | ||||||||
| Cash Equities and Equity Options | 327 | 286 | 14 | % | ||||||||
| Fixed Income and Credit(2) | 240 | 139 | 72 | % | ||||||||
| OTC and Other Transactions(3) | 49 | 50 | (2 | )% | ||||||||
| Other Revenue(4) | 234 | 202 | 16 | % | ||||||||
| Segment Revenue | $ | 2,420 | $ | 2,128 | 14 | % | ||||||
(1) Financials include interest rates and other financial futures and options.
(2) Fixed income and credit includes fixed income execution, CDS execution and clearing and ICE Mortgage Services.
(3) OTC & other transactions include physical energy.
(4) Other revenue includes 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, exchange member fees, and agriculture grading and certification fees.
| • | Energy futures and options revenue for the full year 2018 increased 6% year-over-year driven by a 5% increase in RPC and a 1% increase in ADV. |
| • | Ags and metals futures and options revenue for the full year 2018 increased 16% year-over-year driven by a 14% increase in ADV and a 2% increase in RPC. |
| • | Financials futures and options revenue for the full year 2018 increased 9% year-over-year driven by a 9% increase in ADV. |
| • | U.S. cash equities and equity options revenue for the full year 2018 increased 14% year-over-year driven by a 43% increase in equity options ADV and a 14% increase in U.S. cash equities. |
| • | Fixed income and credit revenue for the full year 2018 increased 72% year-over-year driven by a 22% increase in CDS clearing revenue and the addition of BondPoint, TMC Bonds and MERS. |
ADV (lots in thousands) | RPC | |||||||||||||||
| 2018 | % Chg | 2018 | % Chg | |||||||||||||
| Energy | 2,747 | 1 | % | $ | 1.39 | 5 | % | |||||||||
| Ags and Metals | 427 | 14 | % | $ | 2.34 | 2 | % | |||||||||
| Financials | 2,770 | 9 | % | $ | 0.49 | —% | ||||||||||
| Interest Rates | 2,330 | 14 | % | $ | 0.38 | 4 | % | |||||||||
| Other Financials | 440 | (10 | )% | $ | 1.05 | 6 | % | |||||||||
| Total Futures and Options | 5,944 | 5 | % | $ | 1.03 | 2 | % | |||||||||
| Cash Equities | 1,734 | 14 | % | $ | 0.050 | (2 | )% | |||||||||
| Equity Options | 3,386 | 43 | % | $ | 0.12 | (17 | )% | |||||||||
2018 included 252 trading days for commodities and other financials, 251 trading days for cash equities and equity options and 257 trading days for interest rates. 2017 included 251 trading days for commodities, other financials, cash equities and equity options and 256 trading days for interest rates.
Other Matters
| • | ICE repurchased $1.2 billion of its common stock and paid $555 million in dividends in 2018. |
| • | Unrestricted cash was $724 million and outstanding debt was $7.4 billion as of December 31, 2018. |
| • | Operating cash flow for 2018 was $2.5 billion, up 21% from $2.1 billion one year ago. 2018 free cash flow was $2.3 billion, up 32% from $1.7 billion one year ago. |
| • | The effective tax rate for the fourth quarter was 16%. |
Financial Guidance
| GAAP | Non-GAAP | |
| 2019 Data Revenue | $2.19 - $2.24 billion | |
| 1Q19 Data Revenue | $540 - $545 million | |
| 2019 Operating Expenses | $2.45 - $2.50 billion | $2.15 - $2.20 billion(1) |
| 1Q19 Operating Expenses | $610 - $620 million | $535 - $545 million(1) |
| 1Q19 Interest Expense | $71 million | |
| 2019 Expense Synergies | $30 million | |
| 2019 Capital Expenditures | $290 - $320 million for operational, non-operational capital expenditures and capitalized development | |
| 2019 Effective Tax Rate | 22.5% - 24.5%(2) | |
| 1Q19 Weighted Average Shares Outstanding | 568 - 574 million shares reflecting January 2019 share repurchases | |
(1) 2019 and 1Q19 non-GAAP operating expenses exclude amortization of acquisition-related intangibles.
(2) This represents 2019 full year guidance for both the GAAP and non-GAAP effective tax rates but note that the GAAP effective tax rate is more susceptible to diverging from this guidance based on items outside the normal course of business that are adjusted for to derive our non-GAAP results. Such items can be unknown, unpredictable or uncertain, requiring unreasonable efforts to determine with any precision and which could potentially be confusing or misleading.
Earnings Conference Call Information
ICE will hold a conference call today, February 7, at 8:30 a.m. ET to review its fourth quarter 2018 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 8241674 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 first quarter 2019 earnings has been scheduled for May 2, 2019 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)
| Twelve Months Ended December 31, | Three Months Ended December 31, | |||||||||||||||
| Revenues: | 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Transaction and clearing, net | $ | 3,483 | $ | 3,131 | $ | 961 | $ | 758 | ||||||||
| Data services | 2,115 | 2,084 | 539 | 525 | ||||||||||||
| Listings | 444 | 426 | 112 | 104 | ||||||||||||
| Other revenues | 234 | 202 | 65 | 54 | ||||||||||||
| Total revenues | 6,276 | 5,843 | 1,677 | 1,441 | ||||||||||||
| Transaction-based expenses: | ||||||||||||||||
| Section 31 fees | 357 | 372 | 85 | 97 | ||||||||||||
| Cash liquidity payments, routing and clearing | 940 | 833 | 284 | 198 | ||||||||||||
| Total revenues, less transaction-based expenses | 4,979 | 4,638 | 1,308 | 1,146 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Compensation and benefits | 994 | 946 | 262 | 229 | ||||||||||||
| Professional services | 131 | 121 | 40 | 27 | ||||||||||||
| Acquisition-related transaction and integration costs | 34 | 36 | 1 | 9 | ||||||||||||
| Technology and communication | 432 | 397 | 112 | 103 | ||||||||||||
| Rent and occupancy | 68 | 69 | 18 | 17 | ||||||||||||
| Selling, general and administrative | 151 | 155 | 42 | 38 | ||||||||||||
| Depreciation and amortization | 586 | 535 | 157 | 131 | ||||||||||||
| Total operating expenses | 2,396 | 2,259 | 632 | 554 | ||||||||||||
| Operating income | 2,583 | 2,379 | 676 | 592 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 22 | 8 | 7 | 3 | ||||||||||||
| Interest expense | (244 | ) | (187 | ) | (71 | ) | (50 | ) | ||||||||
| Other income, net | 159 | 326 | 126 | 126 | ||||||||||||
| Other income (expense), net | (63 | ) | 147 | 62 | 79 | |||||||||||
| Income before income tax expense | 2,520 | 2,526 | 738 | 671 | ||||||||||||
| Income tax expense (benefit) | 500 | (28 | ) | 119 | (568 | ) | ||||||||||
| Net income | $ | 2,020 | $ | 2,554 | $ | 619 | $ | 1,239 | ||||||||
| Net income attributable to non-controlling interest | (32 | ) | (28 | ) | (8 | ) | (6 | ) | ||||||||
| Net income attributable to Intercontinental Exchange, Inc. | $ | 1,988 | $ | 2,526 | $ | 611 | $ | 1,233 | ||||||||
| Earnings per share attributable to Intercontinental Exchange, Inc. common stockholders: | ||||||||||||||||
| Basic | $ | 3.46 | $ | 4.29 | $ | 1.07 | $ | 2.11 | ||||||||
| Diluted | $ | 3.43 | $ | 4.25 | $ | 1.07 | $ | 2.09 | ||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | 575 | 589 | 569 | 584 | ||||||||||||
| Diluted | 579 | 594 | 573 | 589 | ||||||||||||
| Dividend per share | $ | 0.96 | $ | 0.80 | $ | 0.24 | $ | 0.20 | ||||||||
Consolidated Balance Sheets
(In millions)
| As of | As of | |||||||
| December 31, 2018 | December 31, 2017 | |||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 724 | $ | 535 | ||||
| Short-term restricted cash and cash equivalents | 818 | 769 | ||||||
| Customer accounts receivable, net | 953 | 903 | ||||||
| Margin deposits, guaranty funds and delivery contracts receivable | 63,955 | 51,222 | ||||||
| Prepaid expenses and other current assets | 242 | 133 | ||||||
| Total current assets | 66,692 | 53,562 | ||||||
| Property and equipment, net | 1,241 | 1,246 | ||||||
| Other non-current assets: | ||||||||
| Goodwill | 13,085 | 12,216 | ||||||
| Other intangible assets, net | 10,462 | 10,269 | ||||||
| Long-term restricted cash and cash equivalents | 330 | 264 | ||||||
| Other non-current assets | 981 | 707 | ||||||
| Total other non-current assets | 24,858 | 23,456 | ||||||
| Total assets | $ | 92,791 | $ | 78,264 | ||||
| Liabilities and Equity: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 521 | $ | 462 | ||||
| Section 31 fees payable | 105 | 128 | ||||||
| Accrued salaries and benefits | 280 | 227 | ||||||
| Deferred revenue | 135 | 125 | ||||||
| Short-term debt | 951 | 1,833 | ||||||
| Margin deposits, guaranty funds and delivery contracts payable | 63,955 | 51,222 | ||||||
| Other current liabilities | 161 | 178 | ||||||
| Total current liabilities | 66,108 | 54,175 | ||||||
| Non-current liabilities: | ||||||||
| Non-current deferred tax liability, net | 2,337 | 2,298 | ||||||
| Long-term debt | 6,490 | 4,267 | ||||||
| Accrued employee benefits | 204 | 243 | ||||||
| Other non-current liabilities | 350 | 296 | ||||||
| Total non-current liabilities | 9,381 | 7,104 | ||||||
| Total liabilities | 75,489 | 61,279 | ||||||
| Commitments and contingencies | ||||||||
| Redeemable non-controlling interests in consolidated subsidiaries | 71 | — | ||||||
| Equity: | ||||||||
| Intercontinental Exchange, Inc. stockholders’ equity: | ||||||||
| Common stock | 6 | 6 | ||||||
| Treasury stock, at cost | (2,354 | ) | (1,076 | ) | ||||
| Additional paid-in capital | 11,547 | 11,392 | ||||||
| Retained earnings | 8,317 | 6,858 | ||||||
| Accumulated other comprehensive loss | (315 | ) | (223 | ) | ||||
| Total Intercontinental Exchange, Inc. stockholders’ equity | 17,201 | 16,957 | ||||||
| Non-controlling interest in consolidated subsidiaries | 30 | 28 | ||||||
| Total equity | 17,231 | 16,985 | ||||||
| Total liabilities and equity | $ | 92,791 | $ | 78,264 | ||||
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 Annual Report on Form 10-K, 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, organic data revenue and 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)
| Trading and Clearing Segment | Data and Listings Segment | Consolidated | ||||||||||||||||||||||
| Twelve Months Ended December 31, | Twelve Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
| Total revenues, less transaction-based expenses | $ | 2,420 | $ | 2,128 | $ | 2,559 | $ | 2,510 | $ | 4,979 | $ | 4,638 | ||||||||||||
| Total operating expenses | $ | 911 | $ | 781 | $ | 1,485 | $ | 1,478 | $ | 2,396 | $ | 2,259 | ||||||||||||
| Less: Interactive Data transaction and integration costs and acquisition-related success fees | 6 | — | 24 | 31 | 30 | 31 | ||||||||||||||||||
| Less: Amortization of acquisition-related intangibles | 73 | 53 | 214 | 208 | 287 | 261 | ||||||||||||||||||
| Less: Accruals relating to investigations and inquiries | — | 14 | — | — | — | 14 | ||||||||||||||||||
| Less: Impairment on divestiture of NYSE Governance Services | — | — | — | 6 | — | 6 | ||||||||||||||||||
| Less: Impairment of exchange registration intangible assets on closure of ICE Futures Canada and ICE Clear Canada | 4 | — | — | — | 4 | — | ||||||||||||||||||
| Less: Employee severance costs related to ICE Futures Canada and ICE Clear Canada operations | 4 | — | — | — | 4 | — | ||||||||||||||||||
| Adjusted total operating expenses | $ | 824 | $ | 714 | $ | 1,247 | $ | 1,233 | $ | 2,071 | $ | 1,947 | ||||||||||||
| Operating income | $ | 1,509 | $ | 1,347 | $ | 1,074 | $ | 1,032 | $ | 2,583 | $ | 2,379 | ||||||||||||
| Adjusted operating income | $ | 1,596 | $ | 1,414 | $ | 1,312 | $ | 1,277 | $ | 2,908 | $ | 2,691 | ||||||||||||
| Operating margin | 62 | % | 63 | % | 42 | % | 41 | % | 52 | % | 51 | % | ||||||||||||
| Adjusted operating margin | 66 | % | 66 | % | 51 | % | 51 | % | 58 | % | 58 | % | ||||||||||||
Adjusted Operating Income, Operating Margin and Operating Expense Reconciliation
(In millions)
(Unaudited)
| Trading and Clearing Segment | Data and Listings Segment | Consolidated | ||||||||||||||||||||||
| Three Months Ended December 31, | Three Months Ended December 31, | Three Months Ended December 31, | ||||||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
| Total revenues, less transaction-based expenses | $ | 657 | $ | 517 | $ | 651 | $ | 629 | $ | 1,308 | $ | 1,146 | ||||||||||||
| Total operating expenses | $ | 256 | $ | 186 | $ | 376 | $ | 368 | $ | 632 | $ | 554 | ||||||||||||
| Less: Interactive Data transaction and integration costs and acquisition-related success fees | 1 | — | — | 8 | 1 | 8 | ||||||||||||||||||
| Less: Amortization of acquisition-related intangibles | 23 | 12 | 55 | 53 | 78 | 65 | ||||||||||||||||||
| Adjusted total operating expenses | $ | 232 | $ | 174 | $ | 321 | $ | 307 | $ | 553 | $ | 481 | ||||||||||||
| Operating income | $ | 401 | $ | 331 | $ | 275 | $ | 261 | $ | 676 | $ | 592 | ||||||||||||
| Adjusted operating income | $ | 425 | $ | 343 | $ | 330 | $ | 322 | $ | 755 | $ | 665 | ||||||||||||
| Operating margin | 61 | % | 64 | % | 42 | % | 41 | % | 52 | % | 52 | % | ||||||||||||
| Adjusted operating margin | 65 | % | 67 | % | 51 | % | 51 | % | 58 | % | 58 | % | ||||||||||||
Adjusted Net Income Attributable to ICE and EPS
(In millions)
(Unaudited)
| Twelve Months Ended December 31, 2018 | Twelve Months Ended December 31, | |||||||
| Net income attributable to ICE | $ | 1,988 | $ | 2,526 | ||||
| Add: Interactive Data transaction and integration costs and acquisition-related success fees | 30 | 31 | ||||||
| Add: Amortization of acquisition-related intangibles | 287 | 261 | ||||||
| Less: Gain on acquisition of MERS | (110 | ) | — | |||||
| Add: Accruals relating to investigation and inquiries | — | 14 | ||||||
| Add: Impairment on divestiture of NYSE Governance Services | — | 6 | ||||||
| Add: Impairment of exchange registration intangible assets on closure of ICE Futures Canada and ICE Clear Canada | 4 | — | ||||||
| Add: Employee severance costs related to ICE Futures Canada and ICE Clear Canada operations | 4 | — | ||||||
| Add/ (Less): Gain on divestiture of Trayport, net | 1 | (110 | ) | |||||
| Less: Cetip investment gain, net | — | (167 | ) | |||||
| Less: Income tax effect for the above items | (98 | ) | (43 | ) | ||||
| Less: Deferred tax adjustments from U.S. tax rate reduction | (11 | ) | (764 | ) | ||||
| Add/ (Less): Deferred tax adjustments on acquisition-related intangibles | (5 | ) | 10 | |||||
| Less: Other tax adjustments | (13 | ) | — | |||||
| Adjusted net income attributable to ICE | $ | 2,077 | $ | 1,764 | ||||
| Diluted earnings per share attributable to ICE | $ | 3.43 | $ | 4.25 | ||||
| Adjusted diluted earnings per share attributable to ICE | $ | 3.59 | $ | 2.97 | ||||
Adjusted Net Income Attributable to ICE and EPS
(In millions)
(Unaudited)
| Three Months Ended December 31, 2018 | Three Months Ended December 31, 2017 | |||||||
| Net income attributable to ICE | $ | 611 | $ | 1,233 | ||||
| Add: Interactive Data transaction and integration costs and acquisition-related success fees | 1 | 8 | ||||||
| Add: Amortization of acquisition-related intangibles | 78 | 65 | ||||||
| Less: Gain on acquisition of MERS | (110 | ) | — | |||||
| Less: Gain on divestiture of Trayport, net | — | (110 | ) | |||||
| Add/ (Less): Income tax effect for the above items | (35 | ) | 11 | |||||
| Add/ (Less): Tax adjustments from U.S. tax rate reduction | 1 | (764 | ) | |||||
| Less: Deferred tax adjustment on acquisition-related intangibles | (10 | ) | (2 | ) | ||||
| Adjusted net income attributable to ICE | $ | 536 | $ | 441 | ||||
| Diluted earnings per share attributable to ICE | $ | 1.07 | $ | 2.09 | ||||
| Adjusted diluted earnings per share attributable to ICE | $ | 0.94 | $ | 0.75 | ||||
GAAP to Organic Data Revenue
(In millions)
(Unaudited)
| 2018 | 2017 | |||||||
| Data Revenue (as reported) | $ | 2,115 | $ | 2,084 | ||||
| Adjusted for: | ||||||||
| 2017 Divestitures & wind down of acq. businesses(1) | — | (116 | ) | |||||
| Acquisitions(2) | (39 | ) | — | |||||
| Organic Data Revenue | $ | 2,076 | $ | 1,968 | ||||
| FX Impact(3) | (8 | ) | — | |||||
| Organic, constant currency revenue | $ | 2,068 | $ | 1,968 | ||||
(1) Includes $74 million of revenue related to the divestiture of Trayport, $16 million for the sale of IDMS and $26 million of revenue related to the wind down of acquired businesses. Wind down of acquired businesses includes the discontinuation of certain businesses acquired as part of larger acquisitions that are no longer strategic for the company. These include the anticipated 2018 erosion of legacy SPSE customers who can no longer use IDC & SPSE as their primary and secondary source of data and the impact of exiting certain non-strategic components of the legacy IDC 7-Ticks business.
(2) Includes revenues from TMX, ICE BofAML, NGX, BondPoint, TMC and CHX.
(3) Net revenues in constant currency are calculated holding both the pound sterling and euro at the average exchange rate from 2017, 1.2890 and 1.1297, respectively. For the year ending December 31, 2018, 6% of our data revenues were billed in pounds sterling and 3% in euros. For the year ending December 31, 2017, 9% of our data revenues were billed in pounds sterling and 3% in euros.
GAAP to Organic Data Revenue
(In millions)
(Unaudited)
| 4Q18 | 4Q17 | |||||||
| Data Revenue (as reported) | $ | 539 | $ | 525 | ||||
| Adjusted for: | ||||||||
| 2017 Divestitures & wind down of acq. businesses(1) | — | (21 | ) | |||||
| Acquisitions(2) | (6 | ) | — | |||||
| Organic Data Revenue | $ | 533 | $ | 504 | ||||
| FX Impact(3) | 1 | — | ||||||
| Organic, constant currency revenue | $ | 534 | $ | 504 | ||||
(1) Includes $16 million of revenue related to the divestiture of Trayport in the fourth quarter of 2017 and $5 million of revenue related to the wind down of acquired businesses. Wind down of acquired businesses includes the discontinuation of certain businesses acquired as part of larger acquisitions that are no longer strategic for the company. These include the anticipated 2018 erosion of legacy SPSE customers who can no longer use IDC & SPSE as their primary and secondary source of data and the impact of exiting certain non-strategic components of the legacy IDC 7-Ticks business.
(2) Includes revenues from ICE BofAML, NGX, BondPoint, TMC and CHX.
(3) Net revenues in constant currency are calculated holding both the pound sterling and euro at the average exchange rate from 4Q17, 1.3279 and 1.1779, respectively. For the three months ending December 31, 2018, 6% of our data revenues were billed in pounds sterling and 3% in euros. For the three months ending December 31, 2017, 9% of our data revenues were billed in pounds sterling and 3% in euros.
Free Cash Flow Calculation
(In millions)
(Unaudited)
| Twelve months ending December 31, 2018 | Twelve months ending December 31, 2017 | |||||||
| Cash flow from operations | $ | 2,533 | $ | 2,085 | ||||
| Less: Capital expenditures and capitalized software development costs | (280 | ) | (357 | ) | ||||
| Add: Section 31 fees, net | 33 | 2 | ||||||
| Free cash flow | $ | 2,286 | $ | 1,730 | ||||
About Intercontinental Exchange
Intercontinental Exchange (NYSE: ICE) is a Fortune 500 company formed in the year 2000 to modernize markets. ICE serves customers by operating the exchanges, clearing houses and information services they rely upon to invest, trade and manage risk across global financial and commodity markets. A leader in market data, ICE Data Services serves the information and connectivity needs across virtually all asset classes. As the parent company of the New York Stock Exchange, the company raises more capital than any other exchange in the world, driving economic growth and transforming markets.
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, 2018, as filed with the SEC on February 7, 2019. 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:
Damon Leavell
+1 212 323 8587