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Intercontinental Exchange (ICE) Q1 Earnings Beat, Up Y/Y

Intercontinental Exchange, Inc. ICE posted first-quarter 2016 operating earnings per share of a record $3.68, which beat the Zacks Consensus Estimate of $3.67 by 0.3%. Also, earnings improved about 20.3% year over year.

Notably, the reported quarter is the best one in the company’s history. The bottom-line improvement was backed by growth across the company’s global markets and data services business.

Total net revenue of $1.15 billion soared 35.8% year over year. The growth reflects a massive 138.5% increase in data services revenues to a record $477 million as well as an increase of 11.1% in transaction and clearing revenues, net, to $929 million. Also, listings revenues increased nearly 2% to a record $103 million, thereby adding to overall growth. However, the total net revenue missed the Zacks Consensus Estimate by 0.2%.

Furthermore, consolidated other revenues, which now include revenues from NYSE Euronext-related technology services and fees from trading license along with regulatory and listed company services, rose 4.7% year over year to $45 million.

Total reported operating expenses increased 46.9% year over year to $570 million, primarily owing to higher compensation and benefits, depreciation and amortization, acquisition-related transaction and integration costs, and technology and communication costs.

Operating income increased 26.4% year over year to $584 million. Operating margin was 51% in the reported quarter, contracting 300 basis points year over year.

Financial Update

In the first quarter, Intercontinental Exchange’s consolidated operating cash flow came in at $597 million, up 28% from the year-ago quarter. Capital expenditure totaled $25 million.

Intercontinental Exchange exited the quarter with cash and cash equivalents of $468 million, down 25.4% from the 2015-end level. Long-term debt of $4.7 billion inched up 0.02% from the 2015-end level.

As of Mar 31 2016 total assets increased 1.5% to $79.1 billion from $77.9 billion as of Dec 31, 2015. As of Mar 31 2016 total equity was $15.1 billion, up 1.6% from $14.8 billion as of Dec 31, 2015.

Capital Deployment

The company returned over $100 million via dividends in the reported quarter.

Guidance for 2016

The company expects adjusted operating expenses in the range of $495 million to $505 million for second quarter of 2016 and $1.97 billion to $2.0 billion for 2016.

Moreover, the company expects data services revenues to increase in the range of 6–7% in 2016 from the 2015 level.
        
The company anticipates realizing expense synergies between $85 million and $90 million in 2016.

Intercontinental Exchange's diluted share count for the second quarter and full-year 2016 is expected to be in the range of 118–121 million.

Zacks Rank and Performance of OtherSecurities Exchanges

ICE presently carries a Zacks Rank #3 (Hold). Among the other players from the securities exchange space that have reported their first-quarter earnings so far, the bottom line at MarketAxess Holdings Inc. MKTX and CBOE Holdings, Inc. CBOE missed their respective Zacks Consensus Estimate, while Nasdaq, Inc.’s NDAQ earnings came in ahead of the consensus.

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