Intercontinental Exchange (NYSE:ICE), or ICE, delivered a strong finish to the first half of 2018 as revenue rose to a record level in the second quarter while earnings increased at a double-digit pace. The company's growing revenue and expanding margins enabled it to generate more than $1.2 billion in cash flow so far this year, $1 billion of which it returned to shareholders via its dividend and stock repurchase program. That strong start to the year, when combined with its optimistic outlook, has ICE on pace to deliver excellent full-year results.

Intercontinental Exchange results: The raw numbers

Metric

Q2 2018

Q2 2017

Year-Over-Year Change

Revenues, less transaction-based expenses

$1.246 billion

$1.18 billion

5.6%

Adjusted net income

$525 million

$449 million

16.9%

Adjusted earnings per share

$0.90

$0.71

26.8%

Data source: Intercontinental Exchange.

Sunlight shines on the historic buildings of the financial district in lower Manhattan, New York City near Wall Street

Image source: Getty Images.

What happened with Intercontinental Exchange this quarter? 

The trading and clearing segment continues to drive results:

  • Trading and clearing revenue increased 11% from last year's second quarter to $609 million. Revenue from energy-related trading and clearing was the biggest overall contributor at $250 million, up 8% year over year. However, the main growth drivers were agriculture (Ag) and metals (up 20% to $74 million) and over the counter (OTC) and other transactions, which jumped 26% to $57 million.
  • Revenue from ICE's data and listings segment rose 1% to $637 million. While pricing and analytics revenue increased 8% to $262 million, a 12% drop in desktops and connectivity revenue offset much of that gain. However, that decline was due entirely to last year's sale of Trayport. Adjusting for this impact, revenue in the data and listings segment would have increased 4% year over year.
  • Net income expanded at a much quicker pace than revenue due to the company's expense reduction initiatives, which helped boost its adjusted operating margin from 58% to 60%.
  • Meanwhile, per-share earnings grew at an even faster rate thanks to the company's stock repurchase program, which has reduced the share count by more than 2% in the past year.

What management had to say

CEO Jeffrey Sprecher commented on the company's results, saying:

We are pleased to report our second quarter results, which extend our track record of execution and growth. We reported another quarter of record revenues and double-digit EPS growth, as strong results in our data and listings segment were complemented by double-digit revenue growth in our trading and clearing segment. As we continue to innovate, customer demand for our unique content, our secure distribution, and our global benchmark contracts has never been stronger.

One of the highlights this year has been the performance of the New York Stock Exchange (NYSE). It ranked as the No. 1 global exchange in the first half of the year after helping companies raise $19.3 billion in proceeds from 41 initial public offerings (IPOs). In addition to that, the NYSE launched the first direct listing (Spotify), which provides private companies with a new way to go public.

Looking forward

"As we look to the second half of the year, we are excited about the array of growth opportunities ahead and our ability to generate value for stockholders," said CFO Scott Hill in the earnings press release. The company's internal growth driver in the second half should be its data business where it sees revenue expanding by more than 6% year over year on an organic basis. Meanwhile, ICE has a strong balance sheet, including more than $500 million in cash, which gives it the financial resources to capture the external growth opportunities it sees. 

Matthew DiLallo owns shares of Intercontinental Exchange. The Motley Fool owns shares of and recommends Intercontinental Exchange. The Motley Fool has a disclosure policy.