Intercontinental Exchange's (NYSE:ICE), or ICE's, focus on expanding its subscription-based data and listings business continues to pay dividends. That segment delivered healthy growth during the first quarter, which helped offset lower trading activity in the period. That enhanced the company's ability to generate free cash flow, allowing it to continue returning money to shareholders while still making investments to expand operations.

Intercontinental Exchange results: The raw numbers

Metric

Q1 2019

Q1 2018

Year-Over-Year Change

Revenues, less transaction-based expenses

$1.27 billion

$1.23 billion

3.7%

Adjusted net income

$527 million

$525 million

0.4%

Adjusted EPS

$0.92

$0.90

2.2%

Data source: Intercontinental Exchange.

What happened with Intercontinental Exchange this quarter?

Data drove the quarter:

  • ICE's data and listing segment recorded $657 million in revenue during the quarter, up 4% compared to last year's first quarter. Data revenue was $546 million, 5% higher year over year, due to strength in exchange data and feeds as well as pricing and analytics, which were up 7% and 5% year over year, respectively. That helps offset a slower 2% growth rate in listings, which generated $111 million in revenue during the quarter. Meanwhile, total revenue from the data and listings segment would have increased 5% year over year if it wasn't for the impact of foreign exchange fluctuations.
  • Market volatility, which spiked at the end of last year, calmed down during the first quarter. As a result, revenue from the trading and clearing segment was only 3% higher than the year-ago period at $613 million. Futures and options revenue in key commodities like energy as well as agriculture and metals declined compared to the year-ago period. The company was able to offset this weakness by delivering strong revenue growth in fixed income and credit, which surged 54% year over year to $87 million.
  • Margins were under a bit of pressure during the quarter, which weighed on profitability. However, the company was able to overcome some of that through its share repurchase program, which provided an incremental boost to per-share earnings.
  • ICE generated $624 million in free cash flow during the quarter, which was an 18% improvement from last year's first quarter. The company returned $440 million of that money to investors via its share repurchase program and paid out $157 million in dividends.
  • The company ended the quarter with $653 million in cash and $7.5 billion in debt. It used $335 million of that money to buy Simplifile, which electronically records real estate transactions.
A data center with visual representationss of data.

Image source: Getty Images.

What management had to say

CEO Jeffrey Sprecher commented on the company's results. He stated that: "We are pleased to report another quarter of revenue and earnings-per-share growth as compounding growth in our subscription-based Data & Listings business helped to offset a quarter of relatively muted trading activity. We remain focused on bringing efficiencies to our customers' workflows and creating value for our stockholders."

ICE has invested heavily over the years to expand its subscription-based offerings to help mute some of the impacts of the volatility in the trading and clearing operations. As a result, the company now gets 52% of its revenue from these recurring sources. That's enabling the company to generate more consistent growth.

Looking forward

ICE plans to continue returning the bulk of its free cash flow to shareholders. While the company is using a portion of its cash balance to buy Simplifile, that won't have any impact on its capital return plans for 2019. The company currently has a $2 billion share buyback program underway that it expects to complete by the middle of next year. Those repurchases should enable ICE to continue growing earnings per share at a faster pace than net income.