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Intercontinental Exchange's Financial Results Continued Their Upward Climb in Q2

Matthew DiLallo, The Motley Fool

Intercontinental Exchange (NYSE: ICE), or ICE, grew its revenue and earnings once again during the second quarter as it maintained its track record of steady growth. That's supplying the global exchange operator with more cash, which it is increasingly returning to shareholders. This trend should continue in the coming quarters, given the company's dominance in the energy market and the investments it's making to expand its subscription-based data business.

Intercontinental Exchange results: The raw numbers

Metric

Q2 2019

Q2 2018

Change

Revenues, less transaction-based expenses

$1.30 billion

$1.25 billion

4.2%

Adjusted net income

$534 million

$525 million

1.7%

Adjusted EPS

$0.94

$0.90

4.4%

Data source: Intercontinental Exchange.

What happened this quarter? 

Data led the way, while energy trading remained robust:

  • ICE's data and listing segment recorded $664 million in revenue during Q2, up 4% from the year-ago period. Sales would have increased 5% if it wasn't for some foreign exchange headwinds. The primary driver of that growth was the data business, where revenue rose 5% to $553 million, thanks mainly to a 9% increase in revenue from exchange data and feeds. Listings revenue, meanwhile, increased by about 1% to $111 million.
  • Trading and clearing revenue also rose by about 4% to $634 million. The main driver of that increase was from fixed income and credit, where revenue soared 77% to $80 million, due mainly to recent acquisitions. ICE also benefited from an active energy market as revenue rose 2% to $255 million, which was the second-highest in the company's history. That was primarily because of the continued volatility in the oil market.
  • Adjusted net income didn't rise as fast as revenue due to some pressure on margins, which dipped 2 percentage points to 58%. That was mainly due to higher operating expenses in the trading and clearing segment.
  • ICE generated $1.2 billion in free cash flow through the first half of this year, up 13% from the year-ago period. The company used the bulk of that money to pay out $312 million in dividends and buy back $780 million worth of its stock. The company's regular repurchase activities continue to chip away at its outstanding share count, which is why earnings per share increased at a faster rate than net income during the quarter.
Barrels of oil rising in height with an upward pointing red arrow in the background.

Image source: Getty Images.

What management had to say 

CEO Jeffrey Sprecher said:

We are pleased to report our second-quarter results, which extends our track record of revenue and earnings-per-share growth. These results reflect the strength of our global energy business as well as the value of compounding growth in our subscription-based Data & Listings business. We remain focused on innovating for our customers, investing in future growth, and creating value for our stakeholders.

One of the highlights in Q2 was ICE's energy business, which helps that market set pricing. The company offers a suite of products that allows the energy industry to manage risk as well as price various commodities such as oil, natural gas, and LNG. The company continues to expand its offerings to meet the evolving needs of the global energy market.

Looking forward 

CFO Scott Hill commented on what lies ahead. He noted that "as we look to the second half of 2019, we remain focused on disciplined investment in support of our strategic growth initiatives." The company will support that growth with its healthy free cash flow. In addition to investing that money, the company will return a substantial portion of it to investors through the dividend as well as continued share repurchases.

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