Intercontinental Exchange Inc.

Hello everyone and welcome to the ICE third quarter 2022 earnings conference call and webcast. My name is Charlie and I'll be coordinating the call today. You will have the opportunity to ask a question at the end of the presentation. If you'd like to register a question, please press star followed by one on your telephone keypad. Please note that we'll be taking one question and one follow-up from each participant. If you wish to ask a further question, please return to the queue. I'll now hand over to your host, Katia Gonzalez, Investor Relations Senior Analyst, to begin. Katia, please go ahead.

Good morning. ICE's third quarter 2022 earnings release and presentation can be found in the investor section of the 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 risk, assumptions, and uncertainties. For a description of the risks that could cause the results to differ materially from those describing forward-looking statements, Please refer to our 2021 from 10-K, third quarter from 10-Q, and other filings with the SEC. In addition, as we announced in May, ICE has agreed to acquire Black Knight. The transaction is pending customary regulatory approval, and we expect to close in the first half of 2023. In connection with the proposed transaction, ICE has filed with the SEC a registration statement on Form S-4 to register the shares of ICE common stock to be issued in connection with the transaction. The registration statement includes a proxy statement of Black Knight that also constitutes a prospective device. Please see the format for filing for additional information regarding the transaction. 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 terms in your earnings materials. When you submit 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, Chair and CEO, Warren Gardner, Chief Financial Officer, Ben Jackson, President, and Lynn Martin, President of the NYSE. I'll now turn the call over to Warren.

Thanks, Katya. Good morning, everyone, and thank you for joining us today. I'll begin on slide four with some of the key highlights from our third quarter results. Third quarter adjusted earnings per share increased 4% to $1.31, which is on top of 30% growth in the third quarter of 2021 and marked the best third quarter in our company's history. Third quarter net revenues totaled a record $1.8 billion, up 3% year over year. While transaction revenues were flat on a year-over-year basis, our recurring revenues, which accounted for over half of our business, increased by 6%, with all three of our business segments contributing to this strong year-over-year growth. Third quarter adjusted operating expenses totaled $727 million, and we're $16 million below the low end of our guidance. These better than expected results were driven by favorable FX trends, continued operating efficiencies, and a handful of gone recurring items within professional services, SG&A, and technology. Shifting to the fourth quarter, we now expect adjusted operating expenses to be in the range of $730 million to $740 million, with the increase relative to the third quarter largely reflecting the reversal of one-time items. As you begin to think about 2023 expenses, the midpoint of our current full-year guidance, or roughly $2,948,000,000, is a reasonable base to build upon. Despite the dynamic and uncertain macroeconomic backdrop, the diversity and, importantly, durability of our business has enabled us to invest through cycles. And while taking the current inflationary backdrop into consideration, we expect to once again invest in our people and the many medium and long-term growth opportunities that exist across our expanded business. Third quarter adjusted operating income totals $1.1 billion, up over 6% year over year, and is on top of 13% pro forma growth in 2021, while our adjusted operating margin expanded by nearly 180 basis points to approximately 60%. Through the first three quarters of 2022, adjusted free cash flow has totaled over $2.1 billion, up 7% year-over-year. Now let's move to slide five, where I'll provide an overview of the performance of our exchange segments. Third quarter exchange net revenues totaled $1 billion, an increase of 8% year over year. In addition to higher levels of collateral at our clearinghouses and thus higher member interest revenues, this strong performance was driven by a 54% increase in our interest rate futures, a 23% increase in our equity derivatives, and a 13% increase in cash equities and options revenues. Importantly, total open interest, which we believe to be the best indicator of longer-term growth, ended October up 11% versus the end of last year, including 7% growth in energy and 18% growth across our financial futures and options complex. Recurring revenues increased by 5% year-over-year. This growth was driven by strong demand for our energy exchange data and a continued benefit from our record 2021 listings performance. While recent market volatility has led to a pause in new listings business, Both the backlog and our conversations with potential partners remains robust, and through the end of October, a record 19 corporations representing a combined market cap of nearly $40 billion have chosen to transfer to the NYSE. Turning now to slide six. In our fixed income and data services segment, third quarter revenues totaled a record $534 million, a 14% increase versus a year ago. Transaction revenues increased by 84%. including 122% growth in ICE bonds and 75% growth in our CDS clearing business. Similar to last quarter, this strong growth was driven by market volatility and rising interest rates, customers allocating additional capital to CDS trading, and our continued efforts to build institutional connectivity to our bond platforms. Recurring revenues, excluding the Euronext migration, grew by 4% in the quarter, driven by demand for additional capacity on the ICE global network as well as double-digit growth in both our consolidated feeds business and our derivative analytics. Somewhat offsetting this strength were asset-based revenues in our index business, which declined by double digits year over year as investors shifted out of higher-fee risk assets, such as equities, munis, and corporate bonds, and into treasury ETFs. In addition, extended fixed-income market volatility is also impacting growth in a portion of our end-of-day fixed-income pricing business. has reduced new issuance, has driven slower growth in the number of outstanding bonds available to be priced. Absent a sharp reversal of these macro trends, we would expect fourth quarter growth to be similar to our third quarter performance. Shifting to mortgage technology on slide seven. Third quarter revenues totaled $276 million. Recurring revenues, which accounted for nearly 60% of segment revenues, and totaled a record $163 million in the quarter, increased 14% year-over-year. These strong recurring revenues continue to drive outperformance versus an industry that experienced a nearly 60% decline in origination volumes. Importantly, data and analytics revenue increased 22% year-over-year, with underlying recurring revenue increasing by over 40%. Similar to last quarter, it's worth noting that industry unit origination volumes were similar to those in the first quarter of 2019. However, Our third quarter 2022 mortgage technology revenues were over $100 million greater, growing at a CAGR of approximately 17% when compared to the pro forma revenues in 1Q19. This is a clear testament to the continued automation and growth in customer adoption of our solutions across the origination workflow. I'll conclude my remarks on slide 8. Year-to-date, we've grown ICE revenue by 6%, adjusted operating income by 10%, and our adjusted earnings per share by 9%, representing the best year-to-date performance in our company's history. Despite dramatically different macroeconomic environments, over a three-year period, you will see a similar story of compounding growth, with ICE revenues increasing at a CAGR of 8%, operating income at 11%, and EPS at 12%. Again, a testament to the resilience and durability of our platform and the all-weather nature of our business model. As we look to the balance of this year, of the year, We're excited about the many growth opportunities in front of us and remain focused on creating value for our stockholders. With that, I'll hand it over to Ben.