After several quarters of relative calm, volatility returned to the global markets during the first quarter of 2018. That drove up trading volumes for both equities and interest rate related products on global exchanges, including those operated by Intercontinental Exchange (ICE -0.09%), or ICE. The associated uptick in trading activities helped propel ICE's financial results during the quarter.
Intercontinental Exchange results: The raw numbers
|
Metric |
Q1 2018 |
Q1 2017 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenues, less transaction-based expenses |
$1.23 billion |
$1.16 billion |
5.1% |
|
Adjusted net income |
$525 million |
$442 million |
18.8% |
|
Adjusted EPS |
$0.90 |
$0.74 |
21.6% |
Data source: Intercontinental Exchange. EPS = earnings per share.
Image source: Getty Images.
What happened with Intercontinental Exchange this quarter?
The trading and clearing segment drove growth:
- Trading and clearing revenue jumped 11% versus the first quarter of 2017 to $596 million due in part to the interest rate related volatility experienced this year. ICE saw a 62% year-over-year increase in equity option volumes traded on the New York Stock Exchange while the daily average volume for EU interest rates traded on the ICE exchange rose 8%. The company also cleared a record $4.7 trillion in credit default swaps (CDS), booking $42 million in revenue in the process.
- The strong trading and clearing revenue helped offset the weakness of ICE's data and listings segment where sales were flat versus the year-ago period at $629 million. However, that's entirely due to foreign exchange fluctuations as revenue would have increased 5% on a constant currency basis.
- Earnings grew at a much quicker pace than revenue due to the company's cost-saving initiatives in the data and listing segment, where operating costs fell 5% year over year, expanding margins from 49% to 52%. Meanwhile, per-share earnings rose even more due to the impact of the company's share repurchase program.
What management had to say
CEO Jeffrey Sprecher commented on the company's results, saying:
We are pleased to report on our first quarter performance, delivering strong results across our trading and clearing and our data and listings segments including record revenues. We completed our strategic acquisition of BondPoint while also generating solid organic growth, as customers' demand of our comprehensive suite of multi-asset class workflow and risk management solutions continues to increase.
As Sprecher notes, ICE benefited from solid organic growth, which it continues to compliment with strategic acquisitions like BondPoint. The company closed that $400 million deal in January, adding a leading provider of fixed income trading solutions to the mix. Meanwhile, CFO Scott Hill noted that the company generated "strong cash flow" in the first quarter, which allowed it to "return nearly $540 million to stockholders through April, up 28% compared to the prior year."
Looking forward
Hill further noted that "2018 is off to a promising start and we are well positioned to build on our proven track record of growth, customer service, and value creation for our stockholders." The company still expects to deliver 6% to 7% organic growth in data revenue this year, while continuing to push down operating expenses, which should provide it with a growing stream of cash flow that it can return to shareholders via its dividend and buybacks.
