Intercontinental Exchange Inc. (ICE +0.98%), or ICE, reported its second-quarter results before the market opened on Wednesday. The global exchange operator beat analysts’ estimates again, turning in another record quarter. The company also continues to generate strong cash flow, most of which is being sent back to shareholders via dividends and share buybacks.
A look at the numbers
For the quarter, ICE reported revenue of $1.07 billion, but after adjusting for transaction-based expenses revenue was $797 million, or up 6% year over year and in line with expectations. Driving this growth was data service fees and listing fees, which were up 29% and 12%, respectively, over the prior year. This helped to offset transaction and clearing revenue, which net of transaction-based expenses fell to $448 million in the quarter. That was down from $460 million in the year-ago quarter due to higher cash-liquidity payments, which more than offset lower Section 31 fees.
Net income from continuing operations was a record $323 million as it is up 23% from the year-ago quarter. Meanwhile, adjusted earnings on a per share basis came in at $2.90 per share, which is up 27% over the second quarter of last year and beat the consensus estimate by $0.13 per share. Cost reductions drove this better-than-expected result as operating expenses were $367 million during the quarter, which is down substantially from $423 million in the year-ago quarter. Expenses fell pretty much across the board, but acquisition-related transaction and integration costs saw the deepest decline, falling by $30 million year over year to just $7 million in the quarter.
The company’s balance sheet remains very strong as it has $700 million in cash and short-term investments against $3.3 billion in debt. This is after the company repaid $1 billion in notes during the quarter and returned $288 million to investors via dividends and share buybacks.
A look at the outlook
ICE expects its expenses to continue to fall through the balance of the year as it is estimating operating expenses will be in the range of $330 million to $335 million over the next two quarters. Meanwhile, it also expects its share count to continue to drop as a result of share buybacks as it could reduce its share count by another 2 million through the end of the year. Given this outlook, the company has the potential to continue to deliver record-breaking earnings growth as long as its revenue doesn’t stop growing.
Investor takeaway
Thanks to strong cost reductions ICE delivered another record-breaking quarter for its investors. Those costs should continue to head lower during the second half of the year and when combined with additional share buybacks could boost earnings per share to new record heights.
