Intercontinental Exchange (ICE), the conglomerate of exchanges and clearing houses, today reported financial results for the second quarter of 2014. For the quarter ended June 30, 2014, consolidated net income attributable to ICE was $226 million, an increase of about 47% from Q2 2013 and consolidated revenues, less transaction-based expenses, reaching $750 million, up about 102% from the same quarter of the previous year.
Certain items were included in ICE’s operating results that were not indicative of the company’s core business. Excluding these items, second quarter’s 2014 adjusted net income was $243 million. Adjusted figures exclude NYSE integration costs of $36 million and certain tax impacts associated with Euronext’s initial public offering (IPO).
“In the second quarter, we successfully executed on several customer and growth driven initiatives while integrating the NYSE and Liffe operations,” said ICE Chairman and CEO Jeffrey C. Sprecher. “In addition to raising capital through the sale of non-core businesses, we transitioned Liffe US to ICE Futures and continued to make solid progress on our strategic initiatives. NYSE grew its leading roster of listed companies and ICE launched new interest rate and energy products to meet global demand for risk management services and provide regulatory compliant solutions.”
Scott Hill , ICE CFO, said: “In our second full quarter post-closing, we announced the sale of non-core NYSE technologies businesses and completed the successful IPO of the Euronext business, which enabled us to pay down debt, de-lever, and increase our return of capital to shareholders. On June 30 we paid a $75 million dividend, and during the month of July, we repurchased $350 million in common stock. Amid a challenging market environment, we remain focused on realizing cost synergies and we have identified an additional $50 million, increasing our total expense synergies from the NYSE acquisition to $550 million. Our strong cash generation, even in a tepid volume environment, will allow us to invest in future growth opportunities and products to better serve our customers while continuing to enable strong returns to our shareholders.”
Second Quarter 2014 Results
Second quarter 2014 consolidated revenues, less transaction-based expenses, were $750 million. Included in this amount are net transaction and clearing revenues, less transaction-based expenses of $460 million.
Consolidated market data revenues for the second quarter of 2014 were $96 million and listings revenues were $83 million. Consolidated other revenues were $111 million, which include technology services, trading license fees, regulatory and listed company service fees, among others.
Consolidated operating expenses were $423 million for the second quarter of 2014, including $36 million in NYSE integration costs. Consolidated operating income for the quarter was $327 million and operating margin was 44%. The effective tax rate for the second quarter was 29%.
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First Half 2014 Results
Consolidated revenues, less transaction-based expenses, in the first half of 2014 were $1.5 billion. Included in this amount are net transaction and clearing revenues, less transaction-based expenses of $958 million.
Consolidated market data revenues for the first half of 2014 were $199 million and listings revenues were $165 million. Consolidated other revenues were $225 million.
Consolidated operating expenses were $829 million for the first half of 2014, including $59 million in Singapore Mercantile Exchange acquisition-related transaction expenses and NYSE integration costs. Consolidated operating income for the first half of 2014 was $718 million and operating margin was 46%. The effective tax rate for the first half was 28%.
Consolidated cash flows from operations were $836 million in the first half of 2014. Operational capital expenditures were $47 million and capitalized software development costs totaled $40 million.
Unrestricted cash and short-term investments were $2.1 billion as of June 30, 2014, of which $1.3 billion is reserved for the repayment of the 2015 Eurobonds, and the Company had $3.9 billion in outstanding debt as of June 30, 2014.
Trading Technology Patents Acquisition
ICE also announced today that it has acquired intellectual property rights that relate to computerized trading strategies. The acquired intellectual property rights include patent claims covering the use of an automated trading system to make price and trading decisions based on market price information. The patents cover multiple-asset classes traded electronically on exchanges, including futures, options and cash equities.
“We believe these intellectual property rights cover important aspects of transacting in today’s markets,” said Intercontinental Exchange Chief Strategy Officer, David Goone. “ICE acquired these patents with the goal of preventing third parties from using these intellectual property rights against our customers. ICE intends to make these patents available broadly for license to customers that provide beneficial liquidity in ICE’s and NYSE’s markets,” Goone added.