Intercontinental Exchange Inc (ICE 0.95%), or ICE, delivered another record quarter when it reported results before the market opened on Tuesday morning. The global network of exchanges delivered strong top- and bottom-line growth, both of which bested consensus analysts' estimates. That strong growth, along with the company's robust cash generating capabilities, enabled it to boost the amount of cash it returns to investors as it increased both its dividend and its buyback authorization.
A look at the numbers
ICE delivered first-quarter consolidated revenue of $850 million, which was up $53 million, or 7%, over last year's first quarter and topped the view of analysts by about $10 million. Driving this growth was data service fees, which brought in $187 million in revenue and were $30 million higher, or 19%, than last year's first quarter and set a new record. Listing fees were also strong as revenue grew $11 million, or 12%, to $101 million, which was also a record for the company. Finally, transaction and clearing revenue was up to $506 million, after transaction-based expenses, or about $8 million higher last year.
Earnings grew much faster than revenue as ICE reported adjusted net income from continued operations of $344 million, or $3.06 per share, which beat analysts' estimates by $0.09 per share. Earnings were up 26% over the prior year as the company reduced its expenses as a result of merger synergies. The company was able to cut its consolidated operating expenses from $406 million to $388 million due to lower compensation and benefits and a reduction in professional services.
ICE generated a prodigious amount of cash flow from operations as it topped $465 million and boosted the company's unrestricted cash position to $752 million. Because of its strong cash flow and solid balance sheet, the company is in a position to increase its capital returns to shareholders. ICE is boosting its dividend by 15% to $0.75 per share and adding to its stock repurchase authorization, which after recent repurchases still has over $500 million remaining.
A look ahead
Another reason why ICE is bolstering its returns to shareholders is because the company sees its strong results continuing in 2015. The company remains on pace to archive its expense synergy goals, and for the second quarter the company expects to see its adjusted operating expenses decline to a range of $335 million to $340 million. By controlling its costs ICE expects to deliver double-digit earnings growth in 2015. Also driving that earnings growth on a per share basis is the company's buyback, which could reduce its outstanding share count by another million shares to 111 million shares.
Investor takeaway
ICE's business model -- acquire to capture cost synergies -- is working well. With that model the company is able to turn mid-single digit revenue growth into even stronger double-digit bottom line growth. That model only increases the company's ability to generate more cash, which it continues to send back to investors in even greater quantities.
