Strong Data and Listings Growth Pushed Intercontinental Exchange Inc's Earnings Higher

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Intercontinental Exchange's (NYSE: ICE), or ICE, revenue rose once again in the second quarter, marking the 17th consecutive time that sales increased. Both the data and listings and the trading and clearing segments delivered growth on the top and bottom lines, though the former delivered higher profit growth. That solid showing puts the company on pace to meet its full-year targets.

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Intercontinental Exchange results: The raw numbers

Metric

Q2 2017

Q2 2016

Year-Over-Year Change

Revenues, less transaction-based expenses

$1.18 billion

$1.13 billion

4.3%

Adjusted net income

$448 million

$411 million

9%

Adjusted EPS

$0.75

$0.69

8.7%

What happened with Intercontinental Exchange this quarter?

The data and listings segment led the charge:

  • Data and listings revenue was $628 million, up 4.3% versus the year-ago quarter. Leading the way was data services revenue, which was up 5% to $521 million thanks to strong organic growth in pricing and analytics as well as exchange data. Meanwhile, listings revenue hit a record $107 million, which is 2% higher year over year. When combined with a 3% decline in adjusted operating expenses, adjusted operating income for the segment was up 11% versus last year's second quarter.
  • Trading and clearing segment revenue rose 4.4% to $550 million thanks to a 5% increase in net revenue from commodities and a 16% increase in revenue from other sources. Despite a 2% increase in adjusted operating costs, adjusted operating income rose 6% versus last year.
  • ICE generated robust free cash flow during the quarter, pushing its year-to-date total to $897 million. The company returned about 80% of that money to investors, repurchasing $469 million in stock and paying $239 million in dividends. It expects to return $1.4 billion to shareholders this year, a nearly $1 billion increase from last year.

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What management had to say

CEO Jeffrey Sprecher commented on the company's second-quarter results, saying,

Our record second quarter performance resulted in our seventeenth consecutive quarter of revenue growth. This was driven by strength in both our data and listings and our trading and clearing segments, demonstrating the ability of our integrated business model to capture opportunities across global markets. We are focused on expanding our comprehensive trading, data and risk management solutions for our customers and creating strong value for shareholders.

ICE's listing business continues to shine because the New York Stock Exchange (NYSE) remains the go-to place for companies that want to raise capital in the global equity market. Through the first half, the NYSE has helped companies raise $19.3 billion via 49 initial public offerings (IPOs), which leads global exchanges by a wide margin and is well ahead of the Nasdaq, which came in third at $8.1 billion. In fact, the NYSE captured 88% of the U.S. market for IPOs this year, as companies choose to list there over the Nasdaq.

Looking forward

In commenting on what lies ahead, ICE's CFO Scott Hill said,

In the second quarter, we built on our track record of consistent revenue growth, expense discipline and margin expansion. This performance generated strong cash flows which allowed us to return over $700 million to shareholders in the first half of 2017 and has us on track to return around $1.4 billion this year. We are well positioned to achieve our growth objectives in 2017 and are investing to strengthen the foundation for continued growth in the future.

The company has already made good on the promise to continue returning cash to shareholders after buying back another $76 million in stock last month. These repurchases are starting to have an impact on the bottom line since the share count has declined nearly 1% over the past year.

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