Intercontinental Exchange, Inc. (NYSE:ICE) Q2 2016 Earnings Conference Call - Final Transcript

Aug 03, 2016 • 08:30 am ET


Intercontinental Exchange, Inc. (NYSE:ICE) Q2 2016 Earnings Conference Call - Final Transcript


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Good morning and welcome to the ICE Second Quarter 2016 earnings conference call. All participants will be in listen-only mode. (Operator Instructions)

After today's presentation there will be an opportunity to ask questions. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Kelly Loeffler. Ms. Loeffler, please go ahead.

Kelly Loeffler

Good morning. ICE's second quarter 2016 earnings release and presentation can be found in the Investor section at These items will be archived and our call will be available for replay.

(Forward-Looking Cautionary Statements)

In our earnings supplement, we refer to certain non-GAAP measures, including adjusted income, operating margins, expenses, EPS, EBITDA, and tax rate. We believe our non-GAAP measures are more reflective of our cash operations and core business performance.

In the appendix of our presentation and earnings press release, you'll find a summary of our GAAP results, a reconciliation to the equivalent GAAP terms, and an explanation of why we deem this information to be meaningful, as well as how management uses these measures.

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. As a reminder, unless otherwise noted, the year-over-year figures we will discuss reflect comparisons against adjusted pro-forma 2015 results.

With us on the call are Jeff Sprecher, Chairman and CEO; Scott Hill, CFO; and Chuck Vice, President and COO.

I will now turn the call over to Scott.

Scott Hill

Thank you, Kelly. Good morning, everyone, and thank you for joining us today.

I'll begin on slide 4 and highlight that the second quarter was our seventh consecutive quarter of double-digit earnings growth. Our performance was driven by revenues that grew 7% and adjusted operating expenses that declined 1% year-over-year.

We generated adjusted operating income growth of 15% and expanded adjusted operating margins by 3 points to 56%. Adjusted earnings per share grew 13% versus the prior year to $3.43. And with continued momentum in our transaction business in July, growing data revenues, and lower expenses we're well positioned in 2016 to extend our decade long track record of double-digit earnings growth.

As you'll see as I move to slide 5, our second quarter performance contributed to strong results for the first half of 2016. We generated consolidated net revenues of $2.3 billion during the first half of the year. Both our trading and clearing segment and our data and listing segment grew 6% versus the first half of 2015. This solid top line growth, combined with disciplined expense management allowed us to expand operating margins by 5 points to 58% and to grow earnings per share 16% to $7.12.

Additionally, we generated record operating cash flow of $1.1 billion in the first half of 2016, which enabled us to pay over $200 million in dividends, even as we reduced our leverage to 2.4 times just six months post the closing of our Interactive Data acquisition. These strong financial results, enabled by our