In this Quarterly Report on Form 10-Q, or Quarterly Report, and unless otherwise indicated, the terms "Intercontinental Exchange ," "ICE," "we," "us," "our," "our company" and "our business" refer toIntercontinental Exchange, Inc. , together with its consolidated subsidiaries. All references to "options" or "options contracts" in the context of our futures products refer to options on futures contracts. Solely for convenience, references in this Quarterly Report to any trademarks, service marks and trade names owned by ICE are listed without the ®, ™ and © symbols, but we will assert, to the fullest extent under applicable law, our rights to these trademarks, service marks and trade names. We also include references to third-party trademarks, trade names and service marks in this Quarterly Report. Except as otherwise expressly noted, our use or display of any such trademarks, trade names or service marks is not an endorsement or sponsorship and does not indicate any relationship between us and the parties that own such marks and names.
The following discussion should be read in conjunction with our consolidated
financial statements and related notes included elsewhere in this Quarterly
Report. Due to rounding, figures in tables may not sum exactly.
Forward-Looking Statements
This Quarterly Report, including the sections entitled "Notes to Consolidated Financial Statements," "Legal Proceedings" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements of historical fact may be forward-looking statements. These forward-looking statements relate to future events or our future financial performance and are based on our present beliefs and assumptions as well as the information currently available to us. They involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance, cash flows, financial position or achievements to differ materially from those expressed or implied by these statements. Forward-looking statements may be introduced by or contain terminology such as "may," "will," "should," "could," "would," "targets," "goal," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue," or the antonyms of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, cash flows, financial position or achievements. Accordingly, we caution you not to place undue reliance on any forward-looking statements we may make. Factors that may affect our performance and the accuracy of any forward-looking statements include, but are not limited to, those listed below: •conditions in global financial markets, domestic and international economic and social conditions, inflation, political uncertainty and discord, geopolitical events or conflicts, international trade policies and sanctions laws; •the impact of the introduction of or any changes in laws, regulations, rules or government policies with respect to financial markets, climate change, increased regulatory scrutiny or enforcement actions and our ability to comply with these requirements; •volatility in commodity prices and equity prices, and price volatility of financial benchmarks and instruments such as interest rates, credit spreads, equity indices, foreign exchange rates, and mortgage origination trends; •the impact of climate change and the transition to renewable energy and a net zero economy; •the business environment in which we operate and trends in our industry, including trading volumes, prevalence of clearing, demand for data services, mortgage lending activity, fees, changing regulations, competition and consolidation; •our ability to minimize the risks associated with operating clearing houses in multiple jurisdictions; •our exchanges' and clearing houses' compliance with their respective regulatory and oversight responsibilities; •the resilience of our electronic platforms and soundness of our business continuity and disaster recovery plans; •our ability to realize the expected benefits of our acquisitions and our investments, including our ability to close the Black Knight acquisition on the terms and timing expected; •our ability to execute our growth strategy, identify and effectively pursue, implement and integrate acquisitions and strategic alliances and realize the synergies and benefits of such transactions within the expected time frame; •the performance and reliability of our trading, clearing and mortgage technologies and those of third-party service providers; •our ability to keep pace with technological developments and client preferences; 32 -------------------------------------------------------------------------------- •our ability to ensure that the technology we utilize is not vulnerable to cyberattacks, hacking and other cybersecurity risks or other disruptive events or to minimize the impact of any such events; •our ability to keep information and data relating to the customers of the users of the software and services provided by our ICE Mortgage Technology business confidential; •the impacts of the COVID-19 pandemic on our business, results of operations and financial condition as well as the broader business environment; •our ability to identify trends and adjust our business to benefit from such trends, including trends in theU.S. mortgage industry such as inflation rates, interest rates, new home purchases, refinancing activity, and home builder and buyer sentiment, among others; •our ability to evolve our benchmarks and indices in a manner that maintains or enhances their reliability and relevance; •the accuracy of our cost and other financial estimates and our belief that cash flows from operations will be sufficient to service our debt and to fund our operational and capital expenditure needs; •our ability to incur additional debt and pay off our existing debt in a timely manner; •our ability to maintain existing market participants and data and mortgage technology customers, and to attract new ones; •our ability to offer additional products and services, leverage our risk management capabilities and enhance our technology in a timely and cost-effective fashion; •our ability to attract, develop and retain key talent; •our ability to protect our intellectual property rights and to operate our business without violating the intellectual property rights of others; and •potential adverse results of threatened or pending litigation and regulatory actions and proceedings. These risks and other factors include, among others, those set forth in Part 1, Item 1(A) under the caption "Risk Factors" in our 2021 Form 10-K, as filed with theSEC onFebruary 3, 2022 . Due to the uncertain nature of these factors, management cannot assess the impact of each factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any of these statements to reflect events or circumstances occurring after the date of this Quarterly Report. New factors may emerge and it is not possible to predict all factors that may affect our business and prospects.
Overview
We are a provider of market infrastructure, data services and technology solutions to a broad range of customers including financial institutions, corporations and government entities. Our products, which span major asset classes including futures, equities, fixed income and residential mortgages in theU.S. , provide our customers with access to mission critical tools that are designed to increase asset class transparency and workflow efficiency. While we report our results in three reportable business segments, we operate as one business, leveraging the collective expertise, particularly in data services and technology, that exists across our platforms to inform and enhance our operations. •In our Exchanges segment, we operate regulated marketplaces for the listing, trading and clearing of a broad array of derivatives contracts and financial securities. •In our Fixed Income and Data Services segment, we provide fixed income pricing, reference data, indices, analytics and execution services as well as global CDS clearing and multi-asset class data delivery solutions. •In our Mortgage Technology segment, we provide an end-to-end technology platform that offers customers comprehensive, digital workflow tools that aim to address the inefficiencies that exist in theU.S. residential mortgage market, from application through closing and the secondary market.
Recent Developments
Pending Acquisition of Black Knight, Inc.
OnMay 4, 2022 , we announced that we had entered into a definitive agreement to acquire Black Knight, Inc., or Black Knight, a software, data and analytics company that serves the housing finance continuum, including real estate data, mortgage lending and servicing, as well as the secondary markets. Pursuant to the merger agreement, Sub will merge with and into Black Knight, with Black Knight surviving as a wholly owned subsidiary of ICE. As ofMay 4, 2022 , the transaction was valued at approximately$13.1 billion , or$85 per share of Black Knight common stock, with cash comprising 80% of the value of the aggregate transaction consideration and shares of our common stock comprising 20% of the value of the aggregate transaction consideration at that time. The aggregate cash component of the transaction 33 -------------------------------------------------------------------------------- consideration is fixed at$10.5 billion , and the value of the aggregate stock component of the transaction consideration will fluctuate with the market price of our common stock and will be determined based on the average of the volume weighted averages of the trading prices of our common stock on each of the ten consecutive trading days ending three trading days prior to the closing of the merger. This transaction builds on our position as a provider of end-to-end electronic workflow solutions for the rapidly evolvingU.S. residential mortgage industry. Black Knight provides a comprehensive and integrated ecosystem of software, data and analytics solutions serving the real estate and housing finance markets. We believe the Black Knight ecosystem adds value for clients of all sizes across the mortgage and real estate lifecycles by helping organizations lower costs, increase efficiencies, grow their businesses, and reduce risk. OnAugust 19, 2022 , our preliminary proxy statement/prospectus on Form S-4 was declared effective by theSEC , and onSeptember 21, 2022 , Black Knight stockholders approved the transaction. The transaction is expected to close in the first half of 2023 following the receipt of regulatory approvals and the satisfaction of customary closing conditions.
Global Market Conditions
Our results of operations are affected by global economic conditions, including macroeconomic conditions and geopolitical events or conflicts. During 2022, macroeconomic conditions, including rising interest rates, recent spikes in inflation rates and market volatility, along with geopolitical concerns, including the war inUkraine and the sanctions and other measures that have been and continue to be imposed in response to the war, created uncertainty and volatility in the global economy and resulted in a dynamic operating environment. Our business has been impacted positively and negatively by these global economic conditions. For instance, due to market volatility and rising interest rates, we have seen increased trading across a number of our products, such as interest rate & equity futures, credit default swaps and bonds. Conversely, increases in mortgage interest rates in 2022 have resulted in reduced consumer and investor demand for mortgages and adversely impacted the transaction-based revenues in our Mortgage Technology segment.
We have suspended all services in
non-sanctioned entities. From an operational perspective, our businesses,
including our exchanges, clearing houses, listings venues, data services
businesses and mortgage platforms, have not suffered a material negative impact
as a result of these events in
We expect the macro environment to remain dynamic in the near-term, and we continue to monitor macroeconomic conditions, including interest rates and inflation rates, as well as the uncertainty surrounding the extent and duration of the ongoing conflict betweenRussia andUkraine , and the impact that any of the foregoing may have on the global economy and on our business.
Tax Policy Changes
In July andAugust 2022 , the CHIPS and Science Act, or CHIPS, and the Inflation Reduction Act of 2022, or IRA, were signed into law. The IRA introduced a 15% corporate alternative minimum tax, or CAMT, on adjusted financial statement income for corporations with profits in excess of$1 billion , effective for tax years afterDecember 31, 2022 . While further guidance on the implementation of the CAMT is expected, we do not expect it will have a material impact to our 2023 effective tax rate. We also do not expect that CHIPS will have a material impact. The IRA also includes a stock buyback excise tax of 1%, which will apply to net stock buybacks afterDecember 31, 2022 . We do not expect this to have a material impact once share repurchases are resumed.
Regulation
Our activities and the markets in which we operate are subject to regulations that impact us as well as our customers, and, in turn, meaningfully influence our activities, the manner in which we operate and our strategy. We are primarily subject to the jurisdiction of regulatory agencies in theU.S. ,U.K. , EU,Canada ,Singapore andAbu Dhabi . Failure to satisfy regulatory requirements can or may give rise to sanctions by the applicable regulator. Global policy makers have undertaken reviews of their existing legal framework governing financial markets in connection with regulatory reform, and have either passed new laws and regulations, or are in the process of debating and/or enacting new laws and regulations that apply to our business and to our customers' businesses. Legislative and regulatory actions may impact the way in which we or our customers conduct business and may create uncertainty, which could affect trading volumes or demand for market data. See Part 1, Item 1 "Business - Regulation" and Part 1, Item 1(A) 34 -------------------------------------------------------------------------------- "Risk Factors" included in our 2021 Form 10-K for a discussion of the primary regulations applicable to our business and certain risks associated with those regulations. Domestic and foreign policy makers continue to review their legal frameworks governing financial markets, and periodically change the laws and regulations that apply to our business and to our customers' businesses. Our key areas of focus on these evolving efforts are: •Regulatory Structure Applicable to Non-EU Clearing Houses. OnJanuary 1, 2020 , the European Markets Infrastructure Regulation, or EMIR 2.2, became effective, which revises the EU's current regulatory and supervisory structure for EU and non-EU clearing houses.The European Securities and Markets Authority, or ESMA, has recognizedICE Clear Europe as a third-country central counterparty, or CCP, under EMIR and determined that it is a Tier 2 CCP on the basis that it is systemically important to the financial stability of the EU or one or more of its Member States. ESMA has recognized all other ICE clearing houses as third-country CCPs and determined that they are Tier 1 CCPs on the basis that they are not systemically-important to the financial stability of the EU or one or more of its Member States. ESMA's continuing implementation of these delegated regulations could still impact one or more of our other non-EU clearing houses. InFebruary 2022 , theEuropean Commission extended the temporary equivalence forU.K. CCPs untilJune 2025 . InMarch 2022 , ESMA extended theICE Clear Europe recognition decision and tiering determination untilJune 2025 and confirmed the recognition and tiering determination of all other ICE clearing houses. •Benchmarks Regulation.The Financial Conduct Authority , orFCA , used its legal powers under theU.K. Benchmarks Regulation, orU.K. BMR, to requireICE Benchmark Administration Limited , or IBA, as the administrator of theLondon Interbank Offered Rate, or LIBOR, to publish certain Sterling and Japanese Yen LIBOR settings under a changed "synthetic" methodology until the end of 2022. As a result of theFCA's June 2022 consultation, theFCA will require IBA to continue publishing 1 and 6-month "synthetic" Sterling LIBOR and is considering whether to require IBA to publish 3-month "synthetic" Sterling LIBOR until the end ofMarch 2023 . "Synthetic" Japanese Yen LIBOR settings will cease at the end of 2022. Any settings published under the "synthetic" methodology are not representative of the underlying market or economic reality the setting is intended to measure as those terms are used in theU.K. BMR. TheFCA has confirmed that it expects certainU.S. Dollar LIBOR settings to continue being published on a representative basis until the end ofJune 2023 . TheFCA stated that it will consider requiring IBA to publish certainU.S. Dollar LIBOR settings beyondJune 30, 2023 under a changed "synthetic" methodology. Usage of the "synthetic" LIBOR and continuingU.S. Dollar LIBOR settings may be restricted or prohibited in certain circumstances under applicable law. TheEuropean Commission used its powers under the EU Benchmarks Regulation, or EU BMR, to designate replacement benchmarks for certain Swiss franc LIBOR settings and the Euro Overnight Index Average, or EONIA, which cover all references to the relevant benchmark. The transition period for the use of benchmarks provided by third-country administrators has been extended until at leastDecember 31, 2023 . InMay 2022 , theEuropean Commission published a consultation on the third-country regime of the EU BMR to prepare for the development of a legislative proposal. InMarch 2022 ,President Biden signed into law federal LIBOR legislation, referred to as the LIBOR Act, designed to reduce uncertainty and economic impacts of the permanent cessation of LIBOR for specified contracts, securities and other agreements that are economically linked to LIBOR. The LIBOR Act provides a statutory framework to replaceU.S. Dollar LIBOR with a benchmark rate based on the SOFR for contracts governed byU.S. law that have no fallbacks or fallbacks that would require the use of a poll or LIBOR-based rate. •Policy intervention to address high energy prices. InMarch 2022 , EU leaders agreed to reduce the EU's dependency on Russian gas, oil and coal imports and invited theEuropean Commission to put forward legislative proposals to ensure security of supply and affordable energy prices. Various options for regulatory intervention have been adopted by theEuropean Commission to allow EU countries to jointly buy strategic reserves of gas. InJune 2022 , the EU imposed a partial embargo on Russian crude oil and petroleum products. InJuly 2022 , EU Member States reached a political agreement on a voluntary reduction of natural gas demand in the EU. InSeptember 2022 , theEuropean Commission approved legislative proposals to address the energy crisis including reducing Member States' energy consumption, imposing a cap on revenues for electricity producers and requiring a contribution on excess profits generated from oil, gas, coal and refinery activities. TheEuropean Commission is also exploring additional measures including a price cap on imported gas and an LNG import benchmark. The potential impact of these measures on the functioning of European energy wholesale markets remains uncertain at this time. •CCP Resolution. InMarch 2022 , theU.K. Treasury published a feedback statement and status update on its plans to enhance theU.K.'s regime for resolution of CCPs in the event that they fail. This is intended to expand the prior regime which was not in line withU.K. Financial Stability Board guidance issued subsequently. Many of the parameters of the new regime have yet to be finalized and will be subject to a consultation process by the Bank of 35 --------------------------------------------------------------------------------
they will include increased CCP contributions (known as “second skin in the
game”) to the default fund.
36
--------------------------------------------------------------------------------
Consolidated Financial Highlights
The following summarizes our results and significant changes in our consolidated financial performance for the periods presented (dollars in millions, except per share amounts and YTD represents the nine-month periods endedSeptember 30th ).
[[Image Removed: ice-20220930_g2.jpg]] [[Image Removed: ice-20220930_g3.jpg]][[Image Removed: ice-20220930_g4.jpg]]
[[Image Removed: ice-20220930_g5.jpg]][[Image Removed: ice-20220930_g6.jpg]][[Image Removed: ice-20220930_g7.jpg]]
(1) The adjusted figures exclude items that are not reflective of our ongoing core operations and business performance. Adjusted net income attributable to ICE is presented net of taxes. These adjusted numbers are not calculated in accordance withU.S. GAAP. See "- Non-GAAP Financial Measures" below. 37 --------------------------------------------------------------------------------
Nine Months Ended September 30, Three Months Ended September 30, 2022 2021 Change 2022 2021 Change Revenues, less transaction-based expenses$ 5,524 $ 5,306 4 %$ 1,811 $ 1,802 1 % Recurring revenues(1)$ 2,781 $ 2,603 7 % $ 930$ 888 5 % Transaction revenues, net(1)$ 2,743 $ 2,703 1 % $ 881$ 914 (4) % Operating expenses$ 2,750 $ 2,737 - % $ 898$ 924 (3) % Adjusted operating expenses(2)$ 2,213 $ 2,228 (1) % $ 727$ 755 (4) % Operating income$ 2,774 $ 2,569 8 % $ 913$ 878 4 % Adjusted operating income(2)$ 3,311 $ 3,078 8%$ 1,084 $ 1,047 4% Operating margin 50 % 48 % 2 pts 50 % 49 % 1 pt Adjusted operating margin(2) 60 % 58 % 2 pts 60 % 58 % 2 pts Other income/(expense), net$ (1,530) $ 1,020 n/a$ (1,240) $ (54)
n/a
Income tax expense/(benefit) $ 186$ 1,049 (82) % $ (152)$ 187 (182) % Effective tax rate 15 % 29 % (14 pts) 47 % 23 % 24 pts Net income/(loss) attributable to ICE$ 1,021 $ 2,531 (60) % $ (191)$ 633 (130) % Adjusted net income attributable to ICE(2)$ 2,276 $ 2,102 8 % $ 733$ 711 3 % Diluted earnings/(loss) per share attributable to ICE common stockholders $ 1.82$ 4.48 (59) %$ (0.34) $ 1.12 (130) % Adjusted diluted earnings per share attributable to ICE common stockholders(2) $ 4.06$ 3.72 9 % $ 1.31$ 1.26 4 % Cash flows from operating activities$ 2,462 $ 2,130 16 %
*Percentage changes in the table above deemed “n/a” are not meaningful.
(1) We define recurring revenues as the portion of our revenues that are
generally predictable, stable, and can be expected to occur at regular intervals
in the future with a relatively high degree of certainty and visibility. We
define transaction revenues as those associated with a more specific
point-in-time service, such as a trade execution.
(2) The adjusted figures exclude items that are not reflective of our ongoing core operations and business performance. Adjusted net income attributable to ICE and adjusted diluted earnings per share attributable to ICE common stockholders are presented net of taxes. These adjusted numbers are not calculated in accordance withU.S. GAAP. See "- Non-GAAP Financial Measures" below. •Revenues, less transaction-based expenses, increased$218 million and$9 million for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021. See "-Exchanges Segment", "Fixed Income and Data Services Segment" and "Mortgage Technology Segment" below for a discussion of the significant changes in our revenues. The increase in revenues during the nine and three months endedSeptember 30, 2022 includes$86 million and$42 million , respectively, in unfavorable foreign exchange effects arising from fluctuations in theU.S. dollar from the comparable periods in 2021. See Item 3 "Quantitative and Qualitative Disclosures About Market Risk-Foreign Currency Exchange Rate Risk" below for additional information on the impact of currency fluctuations. •Operating expenses increased$13 million and decreased$26 million for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021. See "-Consolidated Operating Expenses" below for a discussion of the significant changes in our operating expenses. The increase in operating expenses during the nine months endedSeptember 30, 2022 and the decrease during the three months endedSeptember 30, 2022 includes$27 million and$13 million , respectively, in favorable foreign exchange effects arising from fluctuations in theU.S. dollar from the comparable periods in 2021. See Item 3 "Quantitative and Qualitative Disclosures About Market Risk-Foreign Currency Exchange Rate Risk" below for additional information on the impact of currency fluctuations.
Variability in Quarterly Comparisons
Our business environment has been characterized by:
•globalization of marketplaces, customers and competitors;
•growing customer demand for workflow efficiency and automation;
•commodity, interest rate and financial markets uncertainty;
•growing demand for data to inform customers’ risk management and investment
decisions;
38 --------------------------------------------------------------------------------
•evolving, increasing and disparate regulation across multiple jurisdictions;
•price volatility increasing customers’ demand for risk management services;
•increasing focus on capital and cost efficiencies;
•customers’ preference to manage risk in markets demonstrating the greatest
depth of liquidity and product diversity;
•the evolution of existing products and new product innovation to serve emerging
customer needs and changing industry agreements;
•rising demand for speed, data, data capacity and connectivity by market
participants, necessitating increased investment in technology; and
•consolidation and increasing competition among global markets for trading,
clearing and listings.
For additional information regarding the factors that affect our results of
operations, see Item 1(A) “Risk Factors” included in our 2021 Form 10-K, and
Part II, Item 1(A) “Risk Factors” below.
Segment Results
Our business is conducted through three reportable business segments, comprised
of the following:
•In our Exchanges segment, we operate regulated marketplaces for the listing, trading and clearing of a broad array of derivatives contracts and financial securities; •In our Fixed Income and Data Services segment, we provide fixed income pricing, reference data, indices, analytics and execution services as well as global CDS clearing and multi-asset class data delivery solutions; and •In our Mortgage Technology segment, we provide an end-to-end technology platform that offers customers comprehensive, digital workflow tools that aim to address the inefficiencies that exist in theU.S. residential mortgage market, from application through closing and the secondary market. While revenues are recorded specifically in the segment in which they are earned or to which they relate, a significant portion of our operating expenses are not solely related to a specific segment because the expenses serve functions that are necessary for the operation of more than one segment. We directly allocate expenses when reasonably possible to do so. Otherwise, we use a pro-rata revenue approach as the allocation method for the expenses that do not relate solely to one segment and serve functions that are necessary for the operation of all segments. Our segments do not engage in intersegment transactions. 39 --------------------------------------------------------------------------------
Exchanges Segment
The following presents selected statements of income data for our Exchanges
segment (dollars in millions and YTD represents the nine-month periods ended
September 30th):
[[Image Removed: ice-20220930_g8.jpg]] [[Image Removed: ice-20220930_g9.jpg]][[Image Removed: ice-20220930_g10.jpg]][[Image Removed: ice-20220930_g11.jpg]][[Image Removed: ice-20220930_g12.jpg]] (1) The adjusted numbers in the charts above are calculated by excluding items that are not reflective of our cash operations and core business performance. As a result, these adjusted numbers are not calculated in accordance withU.S. GAAP. See "- Non-GAAP Financial Measures" below. 40 -------------------------------------------------------------------------------- Nine Months Ended September Three Months Ended September 30, 30, 2022 2021 Change 2022 2021 Change Revenues: Energy futures and options$ 884 $ 900 (2) %$ 266 $ 316 (16) % Agricultural and metals futures and options 179 177 1 57 56 1 Financial futures and options 375 281 33 122 93 30 Futures and options 1,438 1,358 6 445 465 (5) Cash equities and equity options 2,021 1,800 12 664 554 20 OTC and other 326 239 37 121 84 45 Transaction and clearing, net 3,785 3,397 11 1,230 1,103
11
Data and connectivity services 651 623 4 219 208 6 Listings 388 356 9 128 123 3 Revenues 4,824 4,376 10 1,577 1,434 10 Transaction-based expenses(1) 1,735 1,534 13 576 475
21
Revenues, less transaction-based expenses 3,089 2,842 9 1,001 959 4 Other operating expenses 725 778 (7) 241 265 (9) Depreciation and amortization 178 186 (4) 60 62 (2) Acquisition-related transaction and integration costs 1 13 (92) - 3 (103) Operating expenses 904 977 (7) 301 330 (9) Operating income$ 2,185 $ 1,865 17 %$ 700 $ 629 11 % Recurring revenues$ 1,039 $ 979 6 %$ 347 $ 331 5 % Transaction revenues, net$ 2,050 $ 1,863 10 %$ 654 $ 628 4 %
(1)Transaction-based expenses are largely attributable to our cash equities and
options business.
Exchanges Revenues Our Exchanges segment includes transaction and clearing revenues from our futures and NYSE exchanges, related data and connectivity services, and our listings business. Transaction and clearing revenues consist of fees collected from derivatives, cash equities and equity options trading and derivatives clearing, and are reported on a net basis, except for the NYSE transaction-based expenses discussed below. Rates per-contract, or RPC, are driven by the number of contracts or securities traded and the fees charged per contract, net of certain rebates. Our per-contract transaction and clearing revenues will depend upon many factors, including, but not limited to, market conditions, transaction and clearing volume, product mix, pricing, applicable revenue sharing and market making agreements, and new product introductions. Transaction and clearing revenues are generally assessed on a per-contract basis and revenues and profitability fluctuate with changes in contract volume and product mix. We consider data and connectivity services revenues and listings revenues to be recurring revenues. Our data and connectivity services revenues are recurring subscription fees related to the various data and connectivity services that we provide which are directly attributable to our exchange venues. Our listings revenues are also recurring subscription fees that we earn for the provision of NYSE listings services for public companies and ETFs, and related corporate actions for listed companies. For the nine months endedSeptember 30, 2022 and 2021, 19% and 16%, respectively, of our Exchanges segment revenues, less transaction-based expenses, were billed in pounds sterling or euros. For the three months endedSeptember 30, 2022 and 2021, 19% and 18%, respectively, of our Exchanges segment revenues, less transaction-based expenses, were billed in pounds sterling or euros. Due to the fluctuations of the pound sterling and euro compared to theU.S. dollar, our Exchanges segment revenues, less transaction-based expenses, were lower by$66 million and$33 million for the nine and three months endedSeptember 30, 2022 , from the comparable periods in 2021. Our exchange transaction and clearing revenues are presented net of rebates. We recorded rebates of$665 million and$790 million for the nine months endedSeptember 30, 2022 and 2021, respectively, and$201 million and$264 million for the three months endedSeptember 30, 2022 and 2021, respectively. We offer rebates in certain of our markets primarily to support market liquidity and trading volume by providing qualified participants in those markets a discount to the applicable commission rate. Such rebates are calculated based on volumes traded. The decrease in rebates for the 41 -------------------------------------------------------------------------------- nine and three months endedSeptember 30, 2022 is primarily due to lower volumes as compared to the prior year and the migration of Sterling futures rebates into the Sterling Overnight Index Average, or SONIA, and a change in the pricing and structure of SONIA products. •Energy Futures and Options: Total energy volume decreased 1% and revenues decreased 2% for the nine months endedSeptember 30, 2022 from the comparable period in 2021 and volume decreased 13% and revenues decreased 16% for the three months endedSeptember 30, 2022 from the comparable period in 2021. -Total oil futures and options volume decreased 10% and 18% for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021, driven, in part, by lower Gasoil volumes which are impacted by the uncertainty around Russian sanctions and the conflict inUkraine . -Our global natural gas futures and options volume increased 18% for the nine months endedSeptember 30, 2022 and decreased 4% for the three months endedSeptember 30, 2022 , from the comparable periods in 2021, as the first half of 2022 benefited from elevated price volatility related to geopolitical events, including the conflict inUkraine . In the third quarter of 2022, increased volumes in our North American gas complex were offset by muted activity in our Dutch TTF natural gas complex. -Our environmentals and other futures and options volume decreased 6% and 20% for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021, due in part to lower power and environmental options volumes. •Agricultural and Metals Futures and Options: Total volumes in our agricultural and metals futures and options markets increased 1% and 4% for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021 and revenues increased 1% for both the nine and three months endedSeptember 30, 2022 , from the comparable periods in 2021. The third quarter of 2022 benefited from elevated price volatility and price inflation driving an increased need to manage risk across our commodity markets.
-Sugar futures and options volumes were flat for the nine months ended
2022
-Other agricultural and metal futures and options volume increased 2% and 3% for
the nine and three months ended
comparable periods in 2021.
•Financial Futures and Options: Total volumes in our financial futures and options markets increased 5% and 15% for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021 and revenues increased 33% and 30% for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021. The nine months endedSeptember 30, 2022 benefited from elevated volatility across global markets driven by geopolitical events, central bank activity and inflationary concerns. -Interest rate futures and options volume increased 3% and 15% for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021, and revenue increased 44% and 37% for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021. Adjusting for the transition of the LIBOR-based Sterling contract to the alternative rate-based SONIA contract, which is half the notional size of the Sterling contract, interest rate volumes increased 27% and 40% for the nine and three months endedSeptember 30, 2022 , respectively from the comparable periods in 2021 driven by interest rate volatility and increased speculation of central bank activity due to inflation concerns. Interest rate futures and options revenues were$235 million and$163 million for the nine months endedSeptember 30, 2022 and 2021, respectively, and$77 million and$55 million for the three months endedSeptember 30, 2022 and 2021, respectively. -Other financial futures and options volume, which includes our MSCI®, FTSE® and NYSE FANG+ equity index products, increased 16% for both the nine and three months endedSeptember 30, 2022 from the comparable periods in 2021. Financial futures and options revenue increased 19% and 20% for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021. The nine months endedSeptember 30, 2022 benefited from elevated volatility across global markets driven by geopolitical events, central bank activity and inflationary concerns. Other financial futures and options revenues were$140 million and$118 million for the nine months endedSeptember 30, 2022 and 2021, respectively and$45 million and$38 million for the three months endedSeptember 30, 2022 and 2021, respectively. 42 -------------------------------------------------------------------------------- •Cash Equities and Equity Options: Cash equities volume increased 3% and 7% for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021 due to higher total market volumes driven by elevated volatility related to inflationary, recessionary and geopolitical concerns. Cash equities revenues, net of transaction-based expenses, were$211 million and$184 million for the nine months endedSeptember 30, 2022 and 2021, respectively, and$64 million and$54 million for the three months endedSeptember 30, 2022 and 2021, respectively. Equity options volume increased 10% for the nine months endedSeptember 30, 2022 , and decreased 1% for the three months endedSeptember 30, 2022 , from the comparable periods in 2021. The overall increase in equity options volume for the nine months endedSeptember 30, 2022 was driven by increased market share. The overall decrease in equity options volume for the three months endedSeptember 30, 2022 was primarily due to the Arca Options Pillar migration. Equity options revenues, net of transaction-based expenses, were$75 million and$82 million for the nine months endedSeptember 30, 2022 and 2021, respectively, and$24 million and$25 million for the three months endedSeptember 30, 2022 and 2021, respectively. •OTC and Other: OTC and other transactions include revenues from our OTC energy business and other trade confirmation services, as well as interest income on certain clearing margin deposits, regulatory penalties and fines, fees for use of our facilities, regulatory fees charged to member organizations of ourU.S. securities exchanges, designated market maker service fees, exchange membership fees and agricultural grading and certification fees. Our OTC and other revenues increased 37% and 45% for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021 primarily due to an increase in interest income on clearing margin deposits. Following theOctober 2021 Bakkt transaction, Bakkt revenues are no longer included within our OTC and other revenues. •Data and Connectivity Services: Our data and connectivity services revenues increased 4% and 6% for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021. The increase in revenue was driven by the strong retention rate of existing customers, the addition of new customers and increased purchases by existing customers. •Listings Revenues: Through NYSE, NYSE American and NYSE Arca, we generate listings revenue related to the provision of listings services for public companies and ETFs, and related corporate actions for listed companies. Listings revenues increased 9% and 3% for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021, driven by the full impact of strong equity capital markets activity in 2021. All listings fees are billed upfront and revenues are recognized over time as the identified performance obligations are satisfied. 43 --------------------------------------------------------------------------------
Selected Operating Data
The following charts and tables present trading activity in our futures and
options markets by commodity type based on the total number of contracts traded,
as well as futures and options rate per contract (in millions, except for
percentages and rate per contract amounts and YTD represents the nine-month
periods ended September 30th):
Volume and Rate per Contract
[[Image Removed: ice-20220930_g13.jpg]][[Image Removed: ice-20220930_g14.jpg]][[Image Removed: ice-20220930_g15.jpg]]
Nine Months Ended September Three Months Ended 30, September 30, 2022 2021 Change 2022 2021 Change Number of contracts traded (in millions): Energy futures and options 572 581 (1) % 173 200 (13) % Agricultural and metals futures and options 77 76 1 25 24 4 Financial futures and options 504 477 5 176 152 15 Total 1,153 1,134 2 % 374 376 (1) % Nine Months Ended September Three Months Ended 30, September 30, 2022 2021 Change 2022 2021 Change Average daily volume of contracts traded (in thousands): Energy futures and options 3,046 3,089 (1) % 2,706 3,126 (13) % Agricultural and metals futures and options 408 404 1 393 379 4 Financial futures and options 2,622 2,495 5 2,668 2,320 15 Total 6,076 5,988 1 % 5,767 5,825 (1) % Nine Months Ended September Three Months Ended 30, September 30, 2022 2021 Change 2022 2021 Change Rate per contract: Energy futures and options$ 1.54 $ 1.55 (1) %$ 1.54 $ 1.58 (3) % Agricultural and metals futures and options$ 2.33 $ 2.33 - %$ 2.26 $ 2.33 (3) % Financial futures and options$ 0.74 $ 0.58 27 %$ 0.69 $ 0.61 13 % 44
-------------------------------------------------------------------------------- Open interest is the aggregate number of contracts (long or short) that clearing members hold either for their own account or on behalf of their clients. Open interest refers to the total number of contracts that are currently "open," - in other words, contracts that have been entered into but not yet liquidated by either an offsetting trade, exercise, expiration or assignment. Open interest is also a measure of the future activity remaining to be closed out in terms of the number of contracts that members and their clients continue to hold in the particular contract and by the number of contracts held for each contract month listed by the exchange. The following charts and table present our quarter-end open interest for our futures and options contracts (in thousands, except for percentages): Open Interest
[[Image Removed: ice-20220930_g16.jpg]][[Image Removed: ice-20220930_g17.jpg]][[Image Removed: ice-20220930_g18.jpg]]
As
of
2022 2021 Change Open interest - in thousands of contracts: Energy futures and options 42,853 44,625 (4) % Agricultural and metals futures and options 3,948 4,056 (3) Financial futures and options 26,636 32,318 (18) Total 73,437 80,999 (9) % The following charts and tables present selected cash and equity options trading data. All trading volume below is presented as average net daily trading volume, or ADV, and is single counted and YTD represents the nine-month periods endedSeptember 30th : 45 --------------------------------------------------------------------------------
[[Image Removed: ice-20220930_g19.jpg]][[Image Removed: ice-20220930_g20.jpg]][[Image Removed: ice-20220930_g21.jpg]][[Image Removed: ice-20220930_g22.jpg]]
Nine Months Ended September 30, Three Months Ended September 30, 2022 2021 Change 2022 2021 Change NYSE cash equities (shares in millions): Total cash handled volume 2,453 2,375 3 % 2,158 2,022 7 % Total cash market share matched 19.9 % 20.0 % (0.1 pts) 19.4 % 20.3 %
(0.9 pts)
NYSE equity options (contracts in thousands): NYSE equity options volume 7,631 6,967 10 % 7,037 7,078 (1) % Total equity options volume 37,888 36,684 3 % 36,994 35,546 4 % NYSE share of total equity options 20.1 % 19.0 % 1.1 pts 19.0 % 19.9 %
(0.9 pts)
Revenue capture or rate per contract: Cash equities rate per contract (per 100 shares)$0.046 $0.041 11 %$0.046 $0.042 11 % Equity options rate per contract$0.05 $0.06 (16) %$0.05 $0.05 1 % Handled volume represents the total number of shares of equity securities, ETFs and crossing session activity internally matched on our exchanges or routed to and executed on an external market center. Matched volume represents the total number of shares of equity securities, ETFs and crossing session activity executed on our exchanges.
Transaction-Based Expenses
Our equities and equity options markets pay fees to theSEC pursuant to Section 31 of the Exchange Act. Section 31 fees are recorded on a gross basis as a component of transaction and clearing fee revenue. These Section 31 fees are assessed to recover the government's costs of supervising and regulating the securities markets and professionals and are subject to change. We, in turn, collect corresponding activity assessment fees from member organizations clearing or settling trades on the equities and options exchanges, and recognize these amounts in our transaction and clearing revenues when invoiced. The activity assessment fees are designed to equal the Section 31 fees. As a result, activity assessment fees and the corresponding Section 31 fees do not have an impact on our net income, although the timing of payment by us will vary from collections. Section 31 fees were$332 million and$204 million for the nine months 46 -------------------------------------------------------------------------------- endedSeptember 30, 2022 and 2021, respectively, and$158 million and$38 million for the three months endedSeptember 30, 2022 and 2021, respectively. The increase in Section 31 fees was primarily due to an increase in rates. The fees we collect are included in cash at the time of receipt and we remit the amounts to theSEC semi-annually as required. The total amount is included in current liabilities and was$58 million as ofSeptember 30, 2022 . We make liquidity payments to cash and options trading customers, as well as routing charges made to other exchanges which are included in transaction-based expenses. We incur routing charges when we do not have the best bid or offer in the market for a security that a customer is trying to buy or sell on one of our securities exchanges. In that case, we route the customer's order to the external market center that displays the best bid or offer. The external market center charges us a fee per share (denominated in tenths of a cent per share) for routing to its system. We record routing charges on a gross basis as a component of transaction and clearing fee revenue. Cash liquidity payments, routing and clearing fees were$1.4 billion and$1.3 billion for the nine months endedSeptember 30, 2022 and 2021, respectively, and$418 million and$437 million for the three months endedSeptember 30, 2022 and 2021, respectively.
Operating Expenses, Operating Income and Operating Margin
The following chart summarizes our Exchanges segment's operating expenses, operating income and operating margin (dollars in millions). See "- Consolidated Operating Expenses" below for a discussion of the significant changes in our operating expenses. Exchanges Segment: Nine Months Ended September 30, Three Months Ended September 30, 2022 2021 Change 2022 2021 Change Operating expenses $ 904$ 977 (7) % $ 301$ 330 (9) % Adjusted operating expenses(1) $ 854$ 909 (6) % $ 284$ 309 (8) % Operating income$ 2,185 $ 1,865 17 % $ 700$ 629 11 % Adjusted operating income(1)$ 2,235 $ 1,933 16 % $ 717$ 650 10 % Operating margin 71 % 66 % 5 pts 70 % 66 % 4 pts Adjusted operating margin(1) 72 % 68 % 4 pts 72 % 68 % 4 pts (1) The adjusted figures exclude items that are not reflective of our ongoing core operations and business performance. These adjusted numbers are not calculated in accordance withU.S. GAAP. See "- Non-GAAP Financial Measures" below. 47 --------------------------------------------------------------------------------
Fixed Income and Data Services Segment
The following charts and table present our selected statements of income data
for our Fixed Income and Data Services segment (dollars in millions and YTD
represents the nine-month periods ended September 30th):
[[Image Removed: ice-20220930_g23.jpg]]
[[Image Removed: ice-20220930_g24.jpg]][[Image Removed: ice-20220930_g25.jpg]][[Image Removed: ice-20220930_g26.jpg]][[Image Removed: ice-20220930_g27.jpg]]
(1) The adjusted figures in the charts above are calculated by excluding items that are not reflective of our cash operations and core business performance. As a result, these adjusted numbers are not calculated in accordance withU.S. GAAP. See "- Non-GAAP Financial Measures" below. 48 --------------------------------------------------------------------------------
Nine Months Ended September Three Months Ended September 30, 30, 2022 2021 Change 2022 2021 Change Revenues: Fixed income execution$ 66 $ 39 69 %$ 26 $ 12 121 % CDS clearing 226 144 57 88 51 72 Fixed income data and analytics 824 804 2 273 272 - Fixed income and credit 1,116 987 13 387 335 15 Other data and network services 439 416 6 147 142 4 Revenues 1,555 1,403 11 534 477 12 Other operating expenses 766 752 2 250 252 (1) Depreciation and amortization 262 257 2 86 85 1 Acquisition-related transaction and integration costs 1 1 45 1 1 (43) Operating expenses 1,029 1,010 2 337 338 - Operating income$ 526 $ 393 34 %$ 197 $ 139 42 % Recurring revenues$ 1,263 $ 1,220 3 %$ 420 $ 414 1 % Transaction revenues$ 292 $ 183 59 %$ 114 $ 63 81 %
In the table above, we consider fixed income data and analytics revenues and
other data and network services revenues to be recurring revenues.
For the nine months endedSeptember 30, 2022 and 2021, 12% and 14%, respectively, of our Fixed Income and Data Services segment revenues were billed in pounds sterling or euros and for the three months endedSeptember 30, 2022 and 2021, 10% and 13%, respectively, of our Fixed Income and Data Services segment revenues were billed in pounds sterling or euros. As the pound sterling or euro exchange rate changes, theU.S. equivalent of revenues denominated in foreign currencies changes accordingly. Due to the fluctuations of the pound sterling and euro compared to theU.S. dollar, our Fixed Income and Data Services revenues were lower by$20 million and$9 million for the nine and three months endedSeptember 30, 2022 , respectively, than the comparable periods in 2021.
Fixed Income and Data Services Revenues
Our Fixed Income and Data Services revenues increased 11% and 12% for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021. The increase in revenue was primarily due to strength in our fixed income execution and CDS clearing businesses due to elevated volatility across global markets driven by geopolitical events, central bank activity and inflationary concerns as well as increased market share. •Fixed Income Execution: Fixed income execution includes revenues from ICE Bonds. Execution fees are reported net of rebates, which were nominal for both the nine and three months endedSeptember 30, 2022 and 2021. Our fixed income execution revenues increased 69% and 121% for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021, due to elevated volatility across global markets driven by geopolitical events, central bank activity and inflationary concerns. •CDS Clearing: CDS clearing revenues increased 57% and 72% for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021. The notional value of CDS cleared was$19.7 trillion and$12.6 trillion for the nine months endedSeptember 30, 2022 and 2021, respectively, and$6.1 trillion and$4.5 trillion for the three months endedSeptember 30, 2022 and 2021, respectively. The increases in the notional value of CDS cleared were primarily driven by heightened volatility related to geopolitical events and inflationary concerns. •Fixed Income Data and Analytics: Our fixed income data and analytics revenues increased 2% for the nine months endedSeptember 30, 2022 and were flat for the three months endedSeptember 30, 2022 from the comparable periods in 2021. The increase in revenue for the nine months endedSeptember 30, 2022 was due to strength in our index business in the first half of 2022 and continued growth in our pricing and reference data business driven by the strong retention rate of existing customers, the addition of new customers and increased purchases by existing customers. This was partially offset by unfavorable foreign exchange effects arising from fluctuations in theU.S. dollar from the comparable periods in 2021. 49 -------------------------------------------------------------------------------- •Other Data and Network Services: Our other data and network services revenues increased 6% and 4% for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021. The increase in revenues was driven primarily by growth in our ICE Global Network offering, coupled with strength in our consolidated feeds and stronger desktop revenues. Annual Subscription Value, or ASV, represents, at a point in time, the data services revenues, which includes Fixed Income Data and Analytics as well as other data and network services, subscribed for the succeeding 12 months. ASV does not include new sales, contract terminations or price changes that may occur during that 12-month period. However, while it is an indicative forward-looking metric, it does not provide a precise growth forecast of the next 12 months of data services revenues. As ofSeptember 30, 2022 , ASV was$1.643 billion , which increased 1.1% compared to the ASV as ofSeptember 30, 2021 . ASV represents nearly 100% of total data services revenues for this segment. This does not adjust for year-over-year foreign exchange fluctuations.
Operating Expenses, Operating Income and Operating Margin
The following chart summarizes our Fixed Income and Data Services segment’s
operating expenses, operating income and operating margin (dollars in millions).
See “- Consolidated Operating Expenses” below for a discussion of the
significant changes in our operating expenses.
Fixed Income and Data Services Segment: Nine Months Ended September 30, Three Months Ended September 30, 2022 2021 Change 2022 2021 Change Operating expenses$ 1,029 $ 1,010 2 % $ 337$ 338 - % Adjusted operating expenses(1) $ 892$ 874 2 % $ 293$ 293 - % Operating income $ 526$ 393 34 % $ 197$ 139 42 % Adjusted operating income(1) $ 663$ 529 25 % $ 241$ 184 31 % Operating margin 34 % 28 % 6 pts 37 % 29 % 8 pts Adjusted operating margin(1) 43 % 38 % 5 pts 45 % 39 % 6 pts (1) The adjusted figures exclude items that are not reflective of our ongoing core operations and business performance. These adjusted numbers are not calculated in accordance withU.S. GAAP. See "- Non-GAAP Financial Measures" below. 50 --------------------------------------------------------------------------------
Mortgage Technology Segment
The following charts and table present our selected statements of income data for our Mortgage Technology segment (dollars in millions and YTD represents the nine-month periods endedSeptember 30th ): [[Image Removed: ice-20220930_g28.jpg]]
[[Image Removed: ice-20220930_g29.jpg]][[Image Removed: ice-20220930_g30.jpg]]
[[Image Removed: ice-20220930_g31.jpg]][[Image Removed: ice-20220930_g32.jpg]]
(1) The adjusted figures in the charts above are calculated by excluding items that are not reflective of our cash operations and core business performance. As a result, these adjusted numbers are not calculated in accordance withU.S. GAAP. See "- Non-GAAP Financial Measures" below. 51 -------------------------------------------------------------------------------- Nine Months Ended September Three Months Ended September 30, 30, 2022 2021 Change 2022 2021 Change Revenues: Origination technology 586 740 (21)% 187 245 (24)% Closing solutions 187 227 (17) 53 88 (39) Data and analytics 66 55 22 22 19 22 Other 41 39 2 14 14 (8) Revenues 880 1,061 (17) 276 366 (25) Other operating expenses 410 406 1 130 140 (6) Depreciation and amortization 328 316 4 112 106 5 Acquisition-related transaction and integration costs 79 28 182 18 10 67 Operating expenses 817 750 9 260 256 2 Operating income$ 63 $ 311 (80)%$ 16 $ 110 (86)% Recurring revenues$ 479 $ 404 19%$ 163 $ 143 14% Transaction revenues$ 401 $ 657 (39)%$ 113 $ 223 (49)% In the table above, we consider subscription fee and certain other revenues to be recurring revenues. Each revenue classification, above, contains a mix of recurring and transaction revenues, based on the various service offerings described in more detail, below.
Mortgage Technology Revenues
Our mortgage technology revenues are derived from our comprehensive, end-to-endU.S. residential mortgage platform. Our mortgage technology business is intended to enable greater workflow efficiency for customers focused on originatingU.S. residential mortgage loans. Mortgage technology revenues decreased$181 million and$90 million for the nine and three months endedSeptember 30, 2022 from the comparable periods in 2021 due to lower mortgage origination volumes driven by rising interest rates. See Note 6 of our consolidated financial statements in this Quarterly Report where discussed further. •Origination technology: Our origination technology acts as a system of record for the mortgage transaction, automating the gathering, reviewing, and verifying of mortgage-related information and enabling automated enforcement of rules and business practices designed to help ensure that each completed loan transaction is of high quality and adheres to secondary market standards. These revenues are based on recurring Software as a Service, or SaaS, subscription fees, with an additive transaction-based or success-based pricing fee as lenders exceed the number of loans closed that are included with their monthly base subscription. In addition, the ICE Mortgage Technology network provides originators connectivity to the mortgage supply chain and facilitates the secure exchange of information between our customers and a broad ecosystem of third-party service providers, as well as lenders and investors that are critical to consummating the millions of loan transactions that occur on our origination network each year. Revenue from the ICE Mortgage Technology network is largely transaction-based. •Closing solutions: Our closing solutions connect key participants, such as lenders, title and settlement agents and individual county recorders, to digitize the closing and recording process. Closing solutions also include revenues from ourMortgage Electronic Registrations Systems, Inc. , or MERS database, which provides a system of record for recording and tracking changes and servicing rights and beneficial ownership interests in loans secured byU.S. residential real estate. Revenues from closing solutions are largely transaction-based and are based on volume of loan closings. •Data and Analytics: Revenues include those related to ICE Mortgage Technology's Automation, Intelligence, Quality, or AIQ, offering which applies machine learning to the entire loan origination process, offering customers greater efficiency by streamlining data collection and validation through our automated document recognition and data extraction capabilities. AIQ revenues can be both recurring and transaction-based in nature. In addition, our data offerings include real-time industry and peer benchmarking tools, which provide originators a granular view into the real-time trends of nearly half theU.S. residential mortgage market. We also provide a Data as a Service, or DaaS, offering through private data clouds for lenders to access their own data and origination information. Revenues related to our data products are largely subscription-based and recurring in nature. 52 --------------------------------------------------------------------------------
•Other: Other revenues include professional services fees, as well as revenues
from ancillary products. Other revenues can be both recurring and
transaction-based in nature.
Operating Expenses, Operating Income and Operating Margin
The following chart summarizes our Mortgage Technology segment’s operating
expenses, operating income and operating margin (dollars in millions). See
“- Consolidated Operating Expenses” below for a discussion of the significant
changes in our operating expenses.
Mortgage Technology Segment: Nine Months Ended September 30, Three Months Ended September 30, 2022 2021 Change* 2022 2021 Change Operating expenses$ 817 $ 750 9% $ 260$ 256 2% Adjusted operating expenses(1)$ 467 $ 445 5% $ 150$ 153 (2)% Operating income $ 63$ 311 (80)% $ 16$ 110 (86)% Adjusted operating income(1)$ 413 $ 616 (33)% $ 126$ 213 (41)% Operating margin 7 % 29 % (22 pts) 6 % 30 % (24 pts) Adjusted operating margin(1) 47 % 58 % (11 pts) 46 % 58 % (12 pts)
(1) The adjusted figures exclude items that are not reflective of our ongoing
core operations and business performance. These adjusted numbers are not
calculated in accordance with GAAP. See “- Non-GAAP Financial Measures”
53 --------------------------------------------------------------------------------
Consolidated Operating Expenses
The following presents our consolidated operating expenses (dollars in millions
and YTD represents the nine-month periods ended September 30th):
[[Image Removed: ice-20220930_g33.jpg]] Nine Months Ended September Three Months Ended September 30, 30, 2022 2021 Change 2022 2021 Change Compensation and benefits$ 1,058 $ 1,093 (3) %$ 344 $ 374 (8) % Professional services 101 124 (19) 32 43 (27) Acquisition-related transaction and integration costs 81 42 93 19 14 38 Technology and communication 513 495 4 169 168 1 Rent and occupancy 63 61 2 22 20 5 Selling, general and administrative 166 163 2 54 52 6 Depreciation and amortization 768 759 1 258 253 2 Total operating expenses$ 2,750 $ 2,737 - %$ 898 $ 924 (3) % The majority of our operating expenses do not vary directly with changes in our volume and revenues, except for certain technology and communication expenses, including data acquisition costs, licensing and other fee-related arrangements and a portion of our compensation expense that is tied directly to our data sales or overall financial performance. We expect our operating expenses to increase in absolute terms in future periods in connection with the growth of our business, and to vary from year-to-year based on the type and level of our acquisitions, integration of acquisitions and other investments. For both the nine and three months endedSeptember 30, 2022 and 2021, 10% of our operating expenses were billed in pounds sterling or euros, and for the three months endedSeptember 30, 2022 and 2021, 9% and 10%, respectively, of 54 -------------------------------------------------------------------------------- our operating expenses were billed in pounds sterling or euros. Due to fluctuations in theU.S. dollar compared to the pound sterling and euro, our consolidated operating expenses were$27 million and$13 million lower during the nine and three months endedSeptember 30, 2022 , respectively, than in the comparable periods in 2021. See Item 3 "- Quantitative and Qualitative Disclosures About Market Risk - Foreign Currency Exchange Rate Risk" below for additional information.
Compensation and Benefits Expenses
Compensation and benefits expense is our most significant operating expense and includes non-capitalized employee wages, bonuses, non-cash or stock compensation, certain severance costs, benefits and employer taxes. The bonus component of our compensation and benefits expense is based on both our financial performance and individual employee performance. The performance-based restricted stock compensation expense is also based on our financial performance. Therefore, our compensation and benefits expense will vary year-to-year based on our financial performance and fluctuations in our number of employees. The below chart summarizes the significant drivers of our compensation and benefits expense results for the periods presented (dollars in millions, except employee headcount). Nine Months Ended September Three Months Ended September 30, 30, 2022 2021 Change 2022 2021 Change Employee headcount 8,935 9,381 (5) % Stock-based compensation expenses$ 110 $ 112 - %$ 37 $ 39 (6) %
Headcount decreased primarily due to a reduction of 608 Bakkt employees
following its deconsolidation, partially offset by 274 additional employees
hired in
Compensation and benefits expense decreased$35 million for the nine months endedSeptember 30, 2022 from the comparable period in 2021, primarily due to$51 million in expenses related to Bakkt during the nine months endedSeptember 30, 2021 , prior to deconsolidation. This was partially offset by a$14 million increase for the nine months endedSeptember 30, 2022 , from the comparable period in 2021, related to additional headcount, increased commissions, merit pay increases, and higher employee insurance costs. The stock-based compensation expenses in the table above relate to employee stock option and restricted stock awards and exclude stock-based compensation related to acquisition-related transaction and integration costs. Compensation and benefits expense decreased$30 million for the three months endedSeptember 30, 2022 , primarily due to$20 million in expenses related to Bakkt during the three months endedSeptember 30, 2021 , prior to deconsolidation.
Professional Services Expenses
Professional services expense includes fees for consulting services received on strategic and technology initiatives, temporary labor, as well as regulatory, legal and accounting fees, and may fluctuate as a result of changes in our use of these services in our business. Professional services expenses decreased$23 million and$11 million for the nine and three months endedSeptember 30, 2022 , respectively, from the comparable periods in 2021, primarily due to$11 million and$6 million in decreased legal fees for the nine and three months endedSeptember 30, 2022 , respectively, as well as$13 million and$6 million of expenses incurred at Bakkt during the nine and three months endedSeptember 30, 2021 , respectively, prior to deconsolidation.
Acquisition-Related Transaction and Integration Costs
We incurred$81 million and$19 million in acquisition-related transaction and integration costs during the nine and three months endedSeptember 30, 2022 , primarily due to legal and consulting expenses related to our pending acquisition of Black Knight and our integration ofEllie Mae, Inc. , or Ellie Mae. We incurred$42 million and$14 million in acquisition-related transaction costs for the nine and three months endedSeptember 30, 2021 , primarily related to our integration of Ellie Mae and the Bakkt transaction. We expect to continue to explore and pursue various potential acquisitions and other strategic opportunities to strengthen our competitive position and support our growth. As a result, we may incur acquisition-related transaction costs in future periods. 55 --------------------------------------------------------------------------------
Technology and Communication Expenses
Technology support services consist of costs for running our wholly-owned data centers, hosting costs paid to third-party data centers and maintenance of our computer hardware and software required to support our technology and cybersecurity. These costs are driven by system capacity, functionality and redundancy requirements. Communication expenses consist of costs or network connections for our electronic platforms and telecommunications costs. Technology and communications expense also includes fees paid for access to external market data, licensing and other fee agreement expenses. Technology and communications expenses may be impacted by growth in electronic contract volume, our capacity requirements, changes in the number of telecommunications hubs and connections with customers to access our electronic platforms directly. Technology and communications expenses increased$18 million for the nine months endedSeptember 30, 2022 from the comparable period in 2021, primarily due to$17 million in increased hardware and software support costs,$15 million in increased hosting costs and$7 million in increased data services costs, partially offset by an$11 million decrease in license expense and$10 million in expenses during the nine months endedSeptember 30, 2021 related to Bakkt prior to deconsolidation. Technology and communications expenses increased$1 million for the three months endedSeptember 30, 2022 from the comparable period in 2021, primarily due to increased hardware and software support costs, hosting costs and data services costs, partially offset by a decrease in license expense and$3 million in expenses during the three months endedSeptember 30, 2021 related to Bakkt prior to deconsolidation. Rent and Occupancy Expenses Rent and occupancy expense relates to leased and owned property and includes rent, maintenance, real estate taxes, utilities and other related costs. We have significant operations located in theU.S. ,U.K. , andIndia , with smaller offices located throughout the world. Rent and occupancy expenses increased$2 million for both the nine and three months endedSeptember 30, 2022 from the comparable periods in 2021, primarily due to increased occupancy costs for the nine and three months endedSeptember 30, 2022 . During the nine and three months endedSeptember 30, 2021 , we incurred$2 million and$1 million in expenses related to Bakkt prior to deconsolidation.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include marketing, advertising, public relations, insurance, bank service charges, dues and subscriptions, travel and entertainment, non-income taxes and other general and administrative costs. Selling, general and administrative expenses increased$3 million for the nine months endedSeptember 30, 2022 from the comparable period in 2021 primarily due to$11 million in increased marketing expenses and$13 million in increased travel and entertainment expenses. This was partially offset by$19 million in expenses related to Bakkt during the nine months endedSeptember 30, 2021 prior to deconsolidation. Selling, general and administrative expenses increased$2 million for the three months endedSeptember 30, 2022 , from the comparable period in 2021, primarily due to increased travel and entertainment expense, dues and subscriptions and taxes and fees. This was partially offset by expenses related to Bakkt during the three months endedSeptember 30, 2021 , prior to deconsolidation.
Depreciation and Amortization Expenses
Depreciation and amortization expense results from depreciation of long-lived assets such as buildings, leasehold improvements, aircraft, hardware and networking equipment, software, furniture, fixtures and equipment over their estimated useful lives. This expense includes amortization of intangible assets obtained in our acquisitions of businesses, as well as on various licensing agreements, over their estimated useful lives. Intangible assets subject to amortization consist primarily of customer relationships, trading products with finite lives and technology. This expense also includes amortization of internally-developed and purchased software over its estimated useful life.
We recorded amortization expenses on intangible assets acquired as part of our
acquisitions, as well as on other intangible assets, of
respectively, and
We recorded depreciation expenses on our fixed assets of
respectively, and
56
——————————————————————————–
© Edgar Online, source
link
More Stories
Stock and Share Market News, Economy and Finance News, Sensex, Nifty, Global Market, NSE, BSE Live IPO News
Over 90 Nifty 500 stocks rose between 100% and 586% since last Independence Day; PSUs lead the way
Union Budget 2024: Multibagger PSU stocks Cochin Shipyard, IRFC, HUDCO, RVNL, NBCC, REC & BHEL in focus today. Here’s why