Intercontinental Exchange Inc. Q2 2026 Earnings Call

Good morning. Thank you for attending today's I Second quarter 2020 Earnings Conference Call and webcast. My name is Micaiah and I'll be the moderator for today's Call All lines will be muted in the presentation portion of the call with an opportunity for your questions and answers at the end. At this time, I'd like to pass the call over to our host, Steve Egerton. Steve, you may begin today's call.

Good morning. ICE second quarter 2020 Earnings release and presentation can be found in the investor section of ice.com. These items will be archived and our call will be available for replay Today's call may contain forward looking statements. These statements, which we undertake no obligation to update, represent our current judgment and are subject to risks, assumptions and uncertainties. For a description of the risks that could cause our results to differ materially from those described in forward looking statements, please refer to our 2025 form 10-K 2026 Second Quarter 10-q and other filings with the SEC. In our earnings. Supplement, we refer to certain non-GAAP measures. We believe our non-GAAP measures are more reflective of our cash operations and core business performance. You will find a reconciliation to the equivalent GAAP term in the earnings materials. When used on this call. Net revenue refers to revenue, net of transaction based expenses and adjusted earnings. Refers to adjusted diluted earnings per share. Throughout this presentation, unless otherwise indicated, references to revenue growth on a constant currency basis. Please see the explanatory notes on the second page of the earnings supplement for additional details regarding the definition of certain items Also, we will be discussing our recently announced acquisition of market access.

ICE market access and the respective directors and executive officers may be deemed to be participants in the solicitation of proxies from market access. Stockholders These statements today do not constitute do not constitute an offer to sell or buy or the solicitation of an offer to sell or buy any securities or solicitation of any vote or approval Investors and stockholders should review the proxy statement and any other documents. Market access may file with the SEC in connection with the acquisition. With us on the call today are Jeff Sprecher, chair and CEO. Warren Gardiner, Chief Financial Officer. Ben. Jackson, president. Lynn Martin, president of NYSE, and Chris. Edmonds, president of fixed income and data Services. I'll now turn over the call to Jeff.

Thank you Steve. Good morning, everyone, and thank you for joining us today This morning we reported the best second quarter in our company's history. Warren and Ben will take you through those results shortly. I want to begin on slide five with the announcement of our agreement to acquire market access, a step that will extend our track record of growth into one of the largest addressable markets in the world. The global fixed income market. ICE, was built on the conviction that opacity and inefficiency in markets are not permanent. Conditions. Their challenges that technology can solve. Since our inception, we followed a consistent strategy to bring transparency, efficiency and standardization to markets and to digitize the analog. Each market that we've taken on has grown more open and more electronic. As a result. Our acquisition of market access will continue. This strategy within one of the largest markets in the world. We've been assembling and building a fixed income franchise. We've become one of the largest and most trusted providers of fixed income pricing, reference data and indices in the world, providing daily evaluated pricing on over 3 million securities. Our ICE indices serve as a benchmark for the global fixed income market, with nearly $1 trillion in ETF assets, benchmarked to them.

In clearing, we operate ICE clear Credit, the industry's leading CDS clearinghouse, and we run the ICE global network connecting the financial community to our data analytics and execution on the execution side, ICE bonds was built through our combination of bond point and TMC, and it serves the trading desks of the largest wealth management firms in the country. Names like Charles Schwab, Fidelity Merrill Lynch, and Edward Jones. With deep liquidity and price discovery across municipal bonds, corporates, treasuries and agencies having built strong distribution in the retail and wealth channel, we now see a clear opportunity to extend our reach into the institutional investor segment, where market access has a leading presence. By bringing these liquidity pools together, the logic is simple. We're building a global fixed income network First, we connect the full spectrum of liquidity from retail to institutional. Second, we make our clients more efficient, improving their experience with a goal of reducing operating costs over time. And third, we turn the combined network into a compounding data and distribution engine. Turn now to slide six. More than 2100 institutional firms participate on the market access network using protocols that are recognized. Industry standards for institutional credit, liquidity.

Large asset managers, pension funds and insurance companies transact at a different scale and through different protocols than the retail and wealth clients that we serve. Today Market access is a leader in the institutional market with investment grade and high yield corporate bonds in emerging markets across approximately 30 local currency markets and in Eurobonds. With a growing portfolio. ICE bonds is a leader in the retail and wealth channel. A complementary liquidity pool with a unique client base. Trade sizes and protocols Putting these two together creates a fully integrated front to back ecosystem spanning the fixed income market, retail and wealth flow along separated from institutional flow will be able to connect into a deep institutional pool and institutional participants will gain access to the diversified order flow that retail and wealth channels bring You've seen this broadening market trend in the US equity securities markets, which we believe we can now further extend into the fixed income securities market and our offering of one of the most robust data sets in the world. Supports efficient price discovery across this broader channel, with fixed income markets. This matters more than most other asset classes. There are millions of instruments, most of which trade infrequently, and the single greatest challenge to any investor is finding the other side.

For a true representation of fair value Connecting these two pools should dramatically increase the probability that a buyer finds a seller, and this price discovery will benefit every market participant We want to offer our clients a common set of rails, whether a client moves upstream to institutional or downstream to retail, they will operate on the same connected infrastructure, creating real economies of scale and market access will bring us to growing treasury rates. Trading platform, which we plan to connect directly into our newly approved Treasury clearing system, extending our credit and fixed income network into the interest rate markets. Our clear Treasury futures franchise was our fastest growing product set in the last quarter, as Ben will discuss shortly. So we look forward to extending these capabilities. Please turn to slide seven. A single connected network does more than deepen liquidity. It will simplify how our clients operate, reduce what costs it takes them to do so. Over time. We plan to collapse a fragmented stack of execution venues, data vendors, and analytics providers into a single integrated workflow Fewer connections. Fewer reconciliations. Fewer points of failure. The same should be true for our customers. Technology spend.

Clients will have access to pricing, liquidity, execution, and analytics through one platform and one connection. For generating alpha. A deeper, broader pool. That means superior fills, tighter spreads, and lower market impact. Layering. ICE. Real time. Evaluated. Pricing and analytics into the workflow should lead to improved decisions. The results for our clients is simple. Better liquidity plus better data equals better transparency and better returns. Achieved at a total lower cost. Moving to slide eight. The most powerful effect we're building is the classic ICE flywheel More liquidity generates more transaction data. Combined with our evaluated pricing, this makes ICE analytics more powerful, more powerful. Analytics attracts more users, more users deepen the pool, and a deeper pool generates yet more data. Each turn of that wheel should compound the value of our clients, and ICE. This is what produces the compounding cash flows that create value for our shareholders. And expanded fixed income network is a direct channel to cross-sell. ICE was evaluated. Pricing reference data and index data, including liquidity scoring, transaction cost analysis, and predictive pricing into the workflow of more than 2100 institutional clients who need exactly these tools to better inform their execution.

Today, many of these market access customers consume ICE data indirectly through third parties, or not even at all. And the way our clients consume data is changing Increasingly, they want data to inform their own models at the point of decision reaching them. There is what our ICE model context, protocol, or ICE MCP server was built to do. Our first MCP release opened a new channel for expanding distribution of our non-proprietary data. Our newly expanded ICE MCP offering now offers ICE proprietary data into our client's AI workflows, and we didn't simply build an open data pipe. We built a client engagement channel that runs both ways. The MCP server connection is the easy part. What matters is what sits behind it. Organized data that arrives with its own meanings attached and which represents and respects our proprietary rights. So that each client model are not left to guess what permissions govern. Who can see what We now offer a complete audit trail so that every output can be traced and trusted in regulated markets. It is this governance and contextual foundation that turns a simple data connection into a resource. That institutions can rely upon. The fixed income network that we're designing will not stop at public credit.

We have a plan to use the same rails to connect private credit clients. We're going to bring in via our initiative with Apollo. So public and private credit will increasingly be accessible on one platform. I suspect it's. History turning fragmented analog markets into connected electronic networks. Then growing and compounding these networks. This is how ICE has grown. It's not by chasing one market or one cycle, but by building infrastructure that compounds through every market environment Market access will make our network broader and deeper, and will advance a strategy that we followed from the start. This deal does not begin a new chapter for ICE. It deepens the story that we've been writing since our inception. I'd like to now hand the call over to Warren Thanks, Jeff. Good morning, everyone, and thank you for joining us today. Please turn to slide nine. As. Jeff described this transaction is a product of deliberate, long term view about where fixed income markets are going and the role. ICE is uniquely positioned to play in that evolution. Let me walk you through the financial terms and our path to value creation Today we announced we have entered into a definitive agreement to acquire market access for $167 per share, representing an enterprise value of $5.7 billion.

The offer price represents a 33% premium to market access. Closing price as of July 29th, and on a fully synergized basis, the transaction represents an EV to adjusted EBITDA multiple of approximately 10.6 times. We. At the transaction will be immediately accretive to ICE adjusted earnings per share in the first year. Post-close with accretion improving as synergies are realized and the combined platform scales. The transaction value. We've announced and intend to underwrite is supported by market access. Recent mid-single digit growth trajectory. However, we believe that ISIS platform. Our data, our network, our client relationships and our track record of deepening engagement over time when combined with market access can accelerate that growth trajectory. Improving growth will take time and investment, but expanding the revenue potential of acquired franchises is a core competency at ICE and the opportunity here is compelling. We expect to achieve approximately $100 million of annualized expense synergies, with one third realized in year one, two thirds by year two, and the full run rate achieved by year three. We. These savings will be driven by the consolidation of corporate functions. Real estate rationalization, vendor and technology overlap, and more efficient use of shared infrastructure across the combined platform.

The. Expansion will be financed entirely in cash through a combination of newly issued bonds, a term loan and commercial paper. We expect the transaction to close in the first half of 2027, subject to regulatory approvals and customary closing conditions. Gross leverage is expected to peak temporarily around 3.4 times. Pro forma EBITDA, and we are targeting a return to three times or below within 18 to 24 months, fully consistent with the pace of the leveraging, we have demonstrated following prior debt finance transactions. Our commitment to maintaining a strong investment grade credit rating is unchanged. On capital return. Alongside our deleveraging program, we expect to increase baseline share repurchases from 350 million to 400 million per quarter. Our board has recently authorized up to 4 billion of share repurchases, and we intend to deploy that capital in a manner that is disciplined, opportunistic and consistent with our obligations to creditors and our investment grade rating We also expect to continue to invest in the organic growth of our business and grow our dividend. The combination of strong free cash flow and a clear capital allocation framework means we do not have to choose between investing and growth and returning capital to shareholders. In closing this transaction represents the next logical extension of ISIS fixed income strategy.

We have spent years building the data, the network and the infrastructure that makes fixed income markets function more efficiently and transparently Market access will bring the execution layer to that foundation. The result is a platform that serves the full workflow of global fixed income. From evaluated, evaluated, pricing and reference data through indices and analytics to electronic execution and post-trade processing. We are building the fixed income market of the future, and we are doing it from a position of financial strength, operational discipline, and a proven playbook for integration and value creation. Now to the quarter. Please turn to slide ten. Our first quarter was exceptional because all three segments fired simultaneously in a high volatility environment. Our second quarter was also exceptional for a different but equally important reason. The platform continued to produce record recurring revenue and strong earnings. Despite a moderation in episodic volatility that durability compounding growth on top of growth in any environment is precisely the model we have built. Second quarter. Adjusted earnings per share were $1.90 a second quarter record, and the second best quarter in our history. Net revenues were $2.7 billion, up 5%, and adjusted operating income was 1.6 billion.

Recurring revenues were a record $1.4 billion, up 8%, underscoring the visibility and resilience of the ICE platform. These results also compound on top of 10% revenue growth in the second quarter of 2025, itself a record at the time. On expenses. Adjusted operating expenses were $1,038,000,000. In line with our guidance range. Year over year growth was driven by performance related compensation tied directly to the strength of our results, which is more than offset by revenues. Accelerated technology investment in our data center footprint and incremental DNA from product development work across bids and mortgage technology. These are capacity building costs funded by the revenues they are generating. Looking forward to the third quarter, we expect adjusted operating expenses in the range of 1 billion, 63 million to 1,000,000,073 million. And our full year adjusted operating expenses are now expected to be between 4,190,000,004 billion 230 million. With the increase driven by further crystallization of performance related compensation. Our accelerated data center program and a product development investment. All of which I would characterize as investment in future growth. CapEx. Totaled 262 million in the second quarter. As we accelerated investments in hardware and our real estate footprint Given our strong free cash flow generation, we have elected to pull forward some of our originally planned 2027 CapEx into 2026.

We now anticipate full year CapEx of approximately $850 million. This acceleration reflects conviction in the growth trajectory ahead, and our desire to be ready to serve incremental demand as it arrives on capital return in the second quarter. We repurchased 651 million of stock, including an incremental 300 million executed when our shares again further disconnected from the fundamentals, including dividends, we returned 945 million to shareholders in this quarter and 1.8 billion in the first half. Another record. While leverage ended the quarter at 2.8 times within our target range Turning to the segments starting on slide 11. In exchanges, net revenue was 1.5 billion. Compounding on top of double digit growth in both 2025 and 2020. For our rates business once again delivered exceptional performance, growing 24% versus the year ago period. As investors and institutions continue to expand and actively manage their duration, exposure, total futures and options open interest was up 20% year over year, signaling the structural engagement we saw in the first quarter is carrying forward. And at the NYSE, transaction revenue was a record, up 15% year over year. Record recurring revenue of 416 million grew 10% with exchange data and connectivity services growing 12%. As customers continue to embed our data into their workflows within.

The NYSE has led the industry in transfers year to date, with nearly 400 billion in market cap, having switched to the exchange, including the largest transfer in NYC history. AstraZeneca and the largest bank transfer and exchange history. Fifth Third Bank. As a result of this broad based strength, we now expect exchange recurring revenues to grow in the high single digit range for the full year 2026. Moving. Now to slide 12. Fixed income and data services. Net revenue was 645 million, up 8%, with record recurring revenue of 531 million, up 10%. Our CDS clearing business delivered the best non roll quarter in the franchise's history, growing despite difficult year over year comparisons. Within. Income and data services. Record revenues were aided by strong net new business and pricing and reference data, deepening consumption of our fixed income data sets, including early signs of engagement by clients. Building AI driven workflows and continued momentum in our index business, which ended the quarter with a record $922 billion in ETF assets under management, up 29% year over year. Results also included approximately $8 million of one time items. Data network technology revenues grew 11%, reflecting strong demand for our global network from both traditional and AI driven workflows.

As a. We are raising our full year FIDs recurring revenue growth guidance to 7 to 8%, up from our prior mid-single digit guidance. As a reminder, second half growth will likely trend towards the lower end of that 7 to 8% range, driven largely by timing and specifically the comparison period in the third quarter and fourth quarter of 2025, which benefited from the sell through of Hall five. Within our data center, it is worth noting that we have already begun selling Hall six and anticipate that revenue will begin to be recognized in early 27, with several additional halls providing further capacity behind it. Shifting. Now to slide 13. In mortgage technology, net revenue was 557 million, up 5%. And on a pro forma basis, inclusive of Black Night, represented the strongest quarterly performance since the first half of 2022. Transaction revenue grew 11%, driven by encompass closed loan revenues that continued to outpace industry volumes and growth. In closing, solutions, recurring revenues totaled $406 million, reflecting continued product adoption. The normalization of encompassed contract renewals and the early benefits of new clients going live across both our origination and servicing platforms. Recurring revenues also benefited from approximately 3 million of one time items.

Accordingly, we anticipate third quarter recurring revenues will remain around current levels as core growth and the new client ramp continues to build. The first half of 2026 has been the strongest in ISIS history. We are returning record capital, accelerating investment and making it strategic acquisition of market access to broaden our network. The structural forces driving our business are not fading. They are broadening. We are confident in our trajectory for the balance of 2026 and well beyond. With that, I'll hand it over to Ben.

Thank you. Warren, and thank you all for joining us this morning. Markets are always evolving, and the breadth and depth of ours positions us to thrive in any economic or geopolitical environment. Our role does not change. We bring transparency and electronic liquidity to markets. And as those rise, participation grows. Customers gain precise new data to hedge and trade with. And the market deepens. You can see it in this quarter's results. Total open interest across our futures and options business was up 20% year over year Participation continued to broaden and our market data user base grew 10% year over year. Customers are relying on our markets more, not less. Financials. Had an exceptional quarter driven by European and UK rates. The defining event was the reversal of the global easing cycle in June, the ECB raised rates for the first time since 2023, and the expectations for rates across major economies repriced sharply higher. When rates move like that. Our customers come to us to manage the risk. In this quarter, you could see how much they leaned on us. In June. Open interest in our rates franchise reached a record of 53 million contracts up over 50% year over year, and Euribor options set a new all time high.

Passing a record that stood since 2010. To put the scale in perspective, the total value of the positions that customers hold across our three main European and UK rates contracts. Euribor, Sonja and Esther reached 62.3 trillion in mid-June, that is. Roughly triple where it stood three years ago. And it. Now exceeds the comparable market tied to US dollar rates for the first time simply. Put more and more of the world's short term interest rate risk is being managed in the markets we operate. What makes that durable is that some of the major central banks the ECB, the Swiss National Bank and the Bank of England are increasingly moving in different directions and our customers need to manage that risk across all of those currencies in one place. Our multi-currency franchise lets them do exactly that in a single liquid market with capital efficient clearing, and no one else can match that breadth, that strength. Runs across the portfolio. In Q two, Sonya average daily volume was up 39% year over year. And euribor up 12, and the momentum has carried into the third quarter with financials, open interest up 40%. Please turn to. Slide 14. Energy volumes were softer this quarter.

But the more important story underneath is structural. Even against a very volatile second quarter last year, total OE across our energy markets was up 8% year to date. Because customers keep their risk on our books through the cycle, rather than stepping away. We are in the middle of another reconfiguration of global supply chains, this time centered on the Middle East. And it coincides with the rewiring of European energy that followed the Russia and Ukraine conflict. Over the prior decade, the liberalization of global LNG trade had already turned our TTF contract into the global benchmark for natural gas. Following the same path, Brent set in crude years later, that franchise is still compounding with TTF participation growing double digits on average over the last five years, and the number of customers subscribing to our TTF market data up more than 17% year over year in the second quarter. That strength runs beyond TTF across our. Energy markets, OE has grown 9% on average over the last five years, and the energy behind that is options where OE has grown 18%. On average, more than four times the pace of futures options now make up 40% of our energy OE, up from.

Roughly a quarter in 2021. This. Options growth matters because it is another sign of how deeply customers rely on us. Options are. How they manage complex, longer dated risk and once that positioning is on our books, it tends to stay. We have studied the durability of options positions versus futures, and the result was clear that options positions tend to be held for a longer term. Often are held to expiry, and many clients hedge their delta risk with futures providing a net benefit to the underlying futures market. At the same time. Application is broadened alongside it, with options participation growing 8% on average double the pace of futures. That is, customers building deeper and more sophisticated hedges representing structural demand. Reconfiguration means more complexity, not less trade. Routes redraw new regional benchmarks emerge and basis risk multiplies across the system. More complexity means more risk to manage. And that is exactly what a global all weather benchmark platform is built for. From Brent and seaborne crude to TTF and global gas flows to Jkm as demand shifts east, the shape of the curve makes the