Intercontinental Exchange Inc.

Hello everyone and welcome to the iSports Quarter 2024 Earnings Conference Call and Webcast. My name's Lydia and I'll be your operator today. After the prepared remarks, there'll be an opportunity to ask questions. If you'd like to participate in our Q&A, you can do so by pressing star followed by one on your telephone keypad. We kindly ask that you limit yourself to one question and return to the queue for any follow-up. I'll now hand you over to Katia Gonzalez, Manager of Investor Relations to begin. Please go ahead.

Good morning. ICE's fourth quarter 2024 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 our description of the risks that could cause our results to differ materially from those described in forward-looking statements, Please refer to our 2024 Form 10-K 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 in core business performance. You'll find a reconciliation to the Kovalev GAAP terms in our 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, Chair and CEO, Warren Gardner, 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 the call over to Warren.

Thanks, Katya. Good morning, everyone, and thank you for joining us today. I'll begin on slide four with a summary of our record 2024 results. Full year adjusted earnings per share totaled $6.07, an increase of 8% year over year, marking the best year in our company's history. For the full year, net revenues totaled a record $9.3 billion, and pro forma for the acquisition of Black Knight increased by 6% versus last year. Full year adjusted operating expenses totaled $3,810,000,000, an increase of roughly 1% year over year on a pro forma basis. It's worth noting that in just 16 months following the close of Black Knight, we have achieved run rate expense synergies of $175,000,000 and now expect to reach our full synergy target of $200,000,000 by the end of 2025. In addition, we are also raising our Black Knight expense synergy target to $230 million. This strong performance drove record full-year adjusted operating income of $5.5 billion, an increase of 10% year-over-year. Moving to cash generation, this record operating performance contributed to full-year free cash flow of $3.6 billion, of which we returned $1 billion to shareholders through dividends while also reducing our leverage to under 3.3 times EBITDA versus 4.3 times upon the close of Black Knight in late 2023. As a result of the significant progress we have made on leverage, we now expect to begin repurchasing shares in the first quarter. Recall that we still expect and are on track to achieve leverage levels of approximately three times EBITDA. We will balance share repurchases with continued deleveraging until we reach this target, which we expect will occur later this year. Moving to slide five, I'll discuss our fourth quarter performance. Fourth quarter adjusted earnings per share totaled $1.52, up 14% versus last year. Fourth quarter net revenues of $2.3 billion increased 5% year over year, driven by transaction revenues of $1.1 billion and recurring revenues of $1.2 billion. Fourth quarter adjusted operating expenses totaled $973 million, $4 million below the low end of our guidance range, driven by reduced marketing and legal spend, as well as lower customer acquisition costs at the NYSE. Now let's move to slide six, where I'll provide an overview of the performance of our exchange segment. Fourth quarter net revenues totaled $1.2 billion, up 9% year over year. Transaction revenues of $883 million were up 13%, in part driven by record revenues across interest rates and our global energy business, which grew 38% and 16% year over year, respectively. Revenues within our global oil complex increased 11% year over year, while natural gas and environmental products, which represent nearly half of our energy revenues, increased by 22% in the quarter and were up 31% for the full year. In addition 2025 is off to a strong start with January volumes increasing 21% year over year and total open interest up 11% year over year, including 13% growth in global energy and 17% growth in our interest rate business. Recurring revenues, which include our exchange data services and our NYSE listings business totaled $353 million. The sequential decline in exchange data services was largely driven by a one-time full-year true-up to our tape revenues at the NYSE, which we do not anticipate will repeat in 2025. As a result, we expect that exchange data and connectivity services revenues will rebound the $240 million to $245 million range in the first quarter. In our listings business, while less than half of global ITOs met the standards to list on our exchange in 2024, the NYSE helped to raise $17 billion in new proceeds, welcoming 53 new operating companies, including seven of the top 10 IPOs and nine of the top 10 best-performing IPOs. Looking to 2025, we expect that recurring revenues in our exchange segment will grow in the low single-digit range, largely driven by continued growth in our futures data services. Turning now to slide seven, I'll discuss our fixed income and data services segment. Fourth quarter revenues totaled $579 million, including transaction revenues of $108 million. Within ICE bonds, lower tax loss harvesting activity relative to 2023 within our muni business offset growth in institutional corporates, while strong CDS clearing activity was offset by lower levels of member interest following two Fed cuts towards the end of 2024. Recurring revenues totaled a record $471 million and grew by 5% year over year. In our fixed income data and analytics business, record fourth quarter revenues of $301 million increased by 5%, driven by growth in pricing and reference data, and another quarter of double-digit growth in our index business. Other data and network services revenues also increased by 5% in the fourth quarter, driven by continued growth for both ICE Global Network and our consolidated feeds offering, as well as continued strength in our desktop solutions. Looking to 2025, and supported by an ASV that exits the fourth quarter up 5% year-over-year, we anticipate mid-single-digit growth in our fixed income and data services recurring revenues. Please flip to slide eight, where I'll discuss the results in our mortgage technology segment. Fourth quarter mortgage technology revenues totaled $508 million, slightly above the high end of our guidance range. Recurring revenues totaled $391 million, While down on a year-over-year basis, revenues improved relative to the third quarter driven by growth in both our servicing solutions and our data and analytics business. Similar to prior quarters, while the majority of Encompass customers renewed at higher minimums, the improvement in recurring revenues was somewhat offset by customers that reduced minimums at renewal. Transaction revenues totaled $117 million, up 12% on a year-over-year basis. but as anticipated, we're down slightly relative to the third quarter due to seasonality in the purchase market, a dynamic that typically impacts both the fourth and first quarter of each year. It's worth noting that according to ICE Mortgage Technology, we continue to see signs of market stabilization as housing inventory continues to rise up 20% in 2024 and annual home price appreciation slowed to the lowest levels since 2011. Moving to guidance for 2025, We anticipate that total IMT revenues will grow in the low single-digit to mid-single-digit range. The high end of the range is underpinned in part by low teens' growth in industry origination volumes, which is similar to expectations set by the MBA, Fannie Mae, and Freddie Mac. But the low end of the range assumes a more conservative origination backdrop that is flat with 2024 levels. At both ends of the range, we anticipate growth in recurring revenues. due in part to a portion of the $55 million in total revenue synergies we have achieved beginning to come online. Please flip to slide 9, where I'll provide some additional full-year guidance. We expect 2025 adjusted operating expenses to be between $3,915,000,000 and $3,965,000,000, an increase of roughly 3% year-over-year at the midpoint. Similar to prior years, we expect to invest in our people, our technology, and growth initiatives across our business, with these investments somewhat offset by synergies related to BlackKind. Moving below the line, similar to last year, we currently expect the full-year tax rate will be in the range of 24 to 26%. And finally, we expect full-year CapEx to be in the range of $730 million to $780 million. As is typical in the case in years following an acquisition, CapEx is expected to be slightly elevated as we invest and reposition the acquired asset. In addition to these IMT-related investments, we will also make revenue-related investments in our data center footprint to meet growing customer demand for additional capacity. In summary, we delivered a very strong finish to another record year of revenues, operating income, and free cash flow, and adjusted earnings per share. We invested across our business while also significantly reducing our leverage. As we kick off 2025, we're focused on once again delivering growth and creating shareholder value. I'd have to take your questions during Q&A, but for now, I'll hand it over to Ben.