Intercontinental Exchange Inc.

Good day, and welcome to the ICE Second Quarter 2021 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Mary Caroline O'Neill, Head of Investor Relations. Please go ahead.

Good morning. ICE's second quarter 2021 earnings release and presentation can be found in the investor section of theice.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 2020 Form 10-K, second quarter Form 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'll 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 are 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. With us on the call today are Jeff Sprecher, Chairman and CEO, Warren Gardner, Chief Financial Officer, Ben Jackson, President, and Lynn Martin, President of Fixed Income and Data Services. I'll now turn the call over to Warren.

Thanks, MC. Good morning, everyone, and thank you for joining us today. I'll begin on slide four with some of the key highlights from our second quarter results. Adjusted earnings per share totaled $1.16, up 12% year over year. Net revenues totaled $1.7 billion, and on a pro forma basis, were up 4% versus last year. While total transaction revenues declined slightly, our recurring revenues, which now represent over half of our business, increased by 10%, with all three of our business segments contributing to the strong year-over-year growth. Adjusted operating expense totaled $744 million. Our investment in BAC contributed approximately $36 million to second quarter expenses, and we're offset by approximately $9 million of net revenues. We now anticipate that the BACTS announced transaction with Victory Park will close in the third quarter. Looking to the second half, we expect third quarter adjusted operating expense to be in the range of $770 million to $780 million, including $55 million related to BACTS, which we expect will be offset by $12 million of net revenue. Incorporating third quarter back expense into our full year guide, we now expect 2021 adjusted operating expenses to be in the range of $2.95 to $2.98 billion. First half free cash flow totals over $1.4 billion, which we used to fund a 10% increase in our dividend while also reducing our leverage, ending the quarter at just under 3.4 times adjusted EBITDA. As noted last quarter, we elected to sell our stake in Coinbase in early April and generating over $1.2 billion in gross proceeds, which we then used to reduce commercial paper outstanding. With respect to our other minority investments, we are in the early stages of exploring a sale of our stake in Euroclear. While the timing of any potential sale remains unclear, our strategy is consistent with our goal to reduce leverage following the acquisition of Ellie Mae and our strategic approach of continuously evaluating and optimizing the allocation of capital across our business. Now let's move to slide five, where I'll provide an overview of the performance of our exchange segment. Second quarter net revenues totaled $909 million, including $582 million of transaction revenues. This strong performance was driven by a 6% increase in our interest rate business, an 11% increase in European natural gas revenues, and a 59% increase in revenues related to global environmental products. Importantly, total open interest, which we believe is the best indicator of long-term growth, is up 14% versus the end of last year, including 10% growth in energy open interest and 21% growth across our financial futures and options complex. Recurring revenues, which include our exchange data services and our NYSE listings business, increased 7% year-over-year. The acceleration in growth was driven by 8% growth in our listings business, as an increasing number of operating company IPOs, particularly in the technology and consumer sectors, are joining the NYSE. Looking to the third quarter, we expect recurring revenues in our exchange segment to be between $324 and $329 million, representing approximately 5% growth year over year, as a sequential improvement in listings revenues is expected to be somewhat offset by lower data fees at the NYSE. Turning now to slide six, I'll discuss our fixed income and data services segment. Second quarter revenues totaled $458 million. 6% growth in our recurring revenues, which accounted for nearly 90% of total segment revenues, offset a year-over-year decline in transaction fees. Fixed income data and analytics, which includes our leading pricing and reference data and ICE data indices, increased by 5%, including another quarter of double-digit growth in our index franchise. Other data and network services grew 7% driven by continued customer demand for additional network capacity. Looking to the third quarter, we expect our recurring revenues to improve sequentially to a range of $409 to $414 million. And, in addition, we now expect full-year recurring revenue growth to be towards the higher end of the 5% to 6% guidance range we provided on our fourth quarter call. Let's go next to slide seven where I will discuss our mortgage technology segment. Please note that my comments on revenue growth are on a pro forma basis. Mortgage technology revenues grew 17% year over year. Second quarter transaction revenues increased by 8% while recurring revenues were up 36% and at $136 million exceeded the high end of our guidance range. These better than expected results driven by a combination of new customer growth and increased adoption of digital workflow tools across origination technology closing solutions and data and analytics shifting to the third quarter we expect the recurring revenues will once again grow sequentially and be in the range of 137 to 142 million dollars representing around 30 percent growth versus last year the first half of 2021 was the strongest in our company's history We once again grew revenues, operating income, and free cash flow. Adjusted earnings per share of $2.50 were up 9% versus the prior record set in the first half of 2020 and have increased 17% on average versus the first half of 2019. In addition, less than one year following our strategic acquisition of Ellie Mae, we have reduced debt by nearly $3 billion while also continuing to strategically invest in future growth. I'll now turn the call over to Ben to discuss some of the highlights of our exchange and mortgage businesses.