Q2 2022 Intercontinental Exchange Inc Earnings Call
His expertise.
Exchange recurring revenues increased by 7% year over year. This growth was driven by strong demand in our energy exchange data continued benefit from our record 2021 listings performance and a onetime accrual in our listings business that we do not expect will reoccur in the second half.
Turning now to slide six.
In our fixed income and data services segment second quarter revenue totaled a record $512 million, a 13% increase versus a year ago.
Transaction revenues increased by 78%, including 85% growth in ice bonds and 76% growth in our Cds clearing business.
This strong growth was driven in part by customers re engaging and allocating more capital to Cvs trading as well as our continued efforts to build institutional connectivity through our bond platforms, where we are seeing market share gains in our municipal bond business.
Recurring revenue growth, which accounted for over 80% of segment revenues grew 5% in the quarter and was once again driven by strength in our consolidated feeds business as well as continued growth in the ice global network.
Looking to the second half, we expect year over year growth in our recurring revenues to continue supported by an assay that enters the third quarter up over 5% year over year.
And that second half as reported recurring revenues with flat to slightly up versus our first half results driven by Euronext datacenter migration, which was included in our original guidance and $10 million of additional FX headwinds.
Shifting to mortgage technology on slide seven.
Second quarter revenues totaled $297 million.
Recurring revenues, which accounted for over half of segment revenues and totaled a $160 million in the quarter increased 18% year over year. These strong recurring revenues continue to drive outperformance versus an industry that experienced a 40% decline in origination volumes.
While the current macroeconomic backdrop is challenging for a number of our customers. It's also presented an opportunity to have more constructive conversations around efficiency and automation across the mortgage origination workflow.
It's worth noting that second quarter unit origination volumes were similar to those in the second quarter of 2019.
However, second quarter 2020, rapid 2022 revenues in our mortgage technology business, where over $100 million greater or up almost 60% when compared to pro forma revenues into 2019.
This is a clear testament to the continued automation and growth and customer adoption of our solutions across the origination workflow.
I'll conclude on slide eight.
Through the first half of the year, we've grown total ice revenue by 7% adjusted operating income by 11%, including 200 basis points of margin expansion and adjusted earnings per share by 12%, representing the best first half in our history.
In addition, we positioned our balance sheet for the acquisition of Black Knight, while also growing our dividend and continuing to invest in future growth.
As we look to the balance of the year. We're excited about the many growth opportunities in front of us and we remain focused on creating value for our stockholders with that I'll hand, it over to Ben.
Thank you Lauren and thank you all for joining US. This morning, please turn to slide nine.
Rising inflation has created an interest rate environment, many of our customers have not navigated in over a decade.
Meanwhile, the continued war in Ukraine has triggered a reshaping of the global energy supply chain, creating new risks and uncertainties for market participants.
Importantly, we remain focused on connecting customers to our leading technology mission critical data and transparent and accessible markets to navigate these uncertain conditions.
And our interest rate markets, we've seen record year to date volumes and our euribor contract as customers increasingly seek to manage risks associated with rising rates and central bank activity.
Europe and the U K.
This heightened risk has also contributed to strength in our equity derivatives complex driving an 18% increase in volumes year to date.
Across our global energy markets customers are navigating supply uncertainty alongside longer term clean energy transition priorities.
This will continue to introduce additional complexity and volatility to energy markets, which should drive greater demand for risk management.
And it is our diverse global energy markets that provide the critical price transparency and risk management tools customers need to navigate both the near term and long term complexities.
Globalization of gas and the clean energy transition are trends that have contributed to the 43% average annual volume growth in our TTS gas business over the past five years.
Driving TTS to emerge as a global gas benchmark.
Through the first half of this year as a result of the Russia, Ukraine conflict global gas markets have tightened significantly increasing the demand for global liquefied natural gas and an uncertain geopolitical environment.
This volatility and uncertainty has driven our global gas volumes increased 31% year to date, including 49% growth in our North American gas business in the second quarter.
Commercial customers continue to rely on our markets to manage their risk as evidenced by the record share in open interest we've achieved in our Henry hub contract, surpassing 50% for the first time ever.
And because we operate a global gas market with benchmarks across North America, Europe , and Asia, we are well positioned to benefit from both the near term volatility and the long term secular growth trends occurring across these markets.
Despite these global energy concerns governments corporates and market participants remain committed to environmental policy to reduce carbon emissions.
As such valuing externalities, such as placing a price on pollution.
Carbon free electricity and carbon sequestration and storage will continue to increase in importance.
This has one of the largest networks of environmental products to value such externalities across the carbon cycle, including renewable fuel contracts carbon allowances nature based solutions and renewable energy certificates.
The breadth of our complex coupled with the growing importance of carbon price transparency has contributed to the 19% average annual volume growth in our environmental complex over the past five years.
Is the clean energy transition continues to introduce new complexities, uncertainties and volatility to energy markets, our global environmental alongside our gas and oil complex is we'll provide the price transparency across the energy spectrum needed to manage these evolving risks.
Turning now to our mortgage business.
I first wanted to touch on our pending acquisition of Black Knight as announced on May 4th of this year.
As we said when we made our announcement back then we continue to believe the transaction will close during the first half of 2023.
Since the announcement and in accordance with our initial expected timeline, we have submitted the necessary regulatory filings. We are working with the FTC as they perform their thoughtful and comprehensive reviews of the proposed transaction.
Out of respect for the FTC's important work on this matter as we work with them towards regulatory approval, we do not intend to comment further on the transaction.
But importantly, we remain very excited about the efficiencies the combined entities will bring to the end consumer and other stakeholders across the mortgage ecosystem.
As interest rates rise and mortgage origination volumes soften from recent record levels. Our customers continued to turn to our mission critical technology to operate more efficiently.
In the second quarter, we once again grew recurring revenues and outperformed the broader industry.
Our focus during these evolving market conditions is first and foremost our customer.
Customer conversations have increasingly centered on efficiency and automation and we continue to work with our customers to find the most efficient ways. They can benefit from the breadth of offerings across our network.
For example, we recently made the decision to offer interested customers our base. He closed solution included in an encompass subscription.
Making it easier and cheaper for customers to adopt and benefit from the efficiencies of an electronic closing.
Our focus on efficiencies has also led to increased interest in our data and analytics products leveraging machine learning technology, our analytics platform automates the steps in the loan manufacturing process and can save lenders thousands of dollars per loan by reducing manufacturing time and complexity.
Year to date, our data and analytics business, which is made up largely of recurring revenues has grown 21% year over year.
We continue to see increased adoption of our analytics and new customers coming onto the platform with a host of new clients added. This year alone represented the likes of Chase a number of leading independent mortgage bankers and a top three homebuilder.
We are pleased that the value of our offerings continues to resonate with lenders and we remain optimistic about the long term opportunity to accelerate the analog to digital conversion happening across the mortgage industry.
Now I'll turn the call over to Jeff.
Thank you Ben good morning, everyone and thank you for joining us.
Please turn to slide 10.
The first half of the year has been marked by rising inflation rising interest rates and continued geopolitical and macroeconomic uncertainty.
Our customers are navigating evolving risks and continue to rely on our data technology and liquid markets to manage these risks in.
In the second quarter. We once again grew revenues grew adjusted operating income and grew adjusted earnings per share.
These record setting second quarter results reflect the strength of our network and the all weather nature of our business model.
Our strategy has always been to find unique and novel ways to apply data and technology to bring efficiencies and transparency to markets, whether it was moving energy trading to the screen clearing OTC swaps modernizing the technology powering the U S equity markets are building datasets for the opaque fixed income.
Markets as we've grown and diversified we've broadened our opportunity set and our expertise has grown providing new markets to grow into and importantly, new ways to provide innovative solutions to customers.
We've leveraged our leading pricing and reference data to build new tools for the front office.
<unk> married our fixed income data to newly expanded climate capabilities and more recently, we combined our expertise in futures contract construction with our index capabilities and with our unique mortgage data to launch both the ice mortgage rate lock index and its associated futures contract. These.
These are just a few examples of the innovation that we can deliver with our expanded technology datasets and expertise.
Our evolution has been intentional diversifying across asset classes and geographies and increasing our mix of recurring revenues with the goal of building a business that today generates compounding earnings growth.
It's how we've.
<unk> grown our adjusted earnings per share for the past 15 years in every year that we've been a public company.
The net result of our compounding earnings growth is the compounding growth in our dividend, which we've grown double digits each year on average since we initiated it in 2013 and which we also grew 15% in this quarter.
Looking now to the second half of the year and beyond we're excited about the many growth opportunities that are in front of us and we remain focused on delivering innovative solutions for our customers, while driving compounding growth for our stockholders.
I'd like to thank our customers for their continued business and their trust and I'd like to thank my colleagues at ice for their contribution to our record second quarter. Following on the heels of our best first quarter, making this an unsurpassed first half result for our company.
With that I'll now turn the call back to our moderator, Victoria and will conduct a question and answer session until 930 am eastern time.
Yes.
Thank you we will now start our Q&A session.
Like to ask a question. Please press star one on your telephone keypad.
To ask a question. Please ensure that your line is only telephony.
All participants to limit themselves to one question per tonne over the possibility to my just a follow up question.
And our first question comes from Richard <unk> at Piper Sandler. Please go ahead. Your line is open.
Good morning, Jeff and then Warren.
It's unfortunate we can't give any comments on that.
Black Knight.
Acquisition, because that's certainly on everybody's mind.
But anyway I'll ask about fixed income.
Then you saw a nice uptick in fixed income execution.
I think it's up 85% up $10 million quarter over quarter.
And I would suspect that's just the retail the retail complex in munis.
Picking up.
And then.
One other question related to fixed income the recurring revenues went down quarter to quarter, just by 1 million I suspect that's currency, but just wanted to get some clarification there as well.
Hi, rich I'm going to hand, it over to Lynn to go through this.
Hi, rich. Thanks for the question you are right that we saw strong growth in our fixed income trading business.
Quarter.
<unk> mentioned in our prepared remarks that was driven off of strength in our muni trading business and wild volatility in the return of retail has certainly been a contributor.
We're seeing our institutional efforts pay off as you are aware over the last two years, we've really focused on leveraging our market leading assets in the muni ecosystem, including our data assets and our index business, which now serves as the benchmark for more than 60% of the AUM in this area to build out the infrastructure to connect.
The institutional market to our muni execution platforms and in this quarter alone. We are seeing the benefits of that work manifest itself in that institutional share within our muni execution platforms has doubled since 2020, enabling us to take share in the broader Miami market and final.
It's worth noting that our institutional business and Muni has grown 250% year over year, a further sign that we're gaining share in this asset class.
And then rich hey, it's worn on your question on the recurring revenues Youre right Thats FX.
Largely FX there is also a little bit of.
AUM related revenue on our ETF business. So we saw during the quarter people shifting into treasuries and out of equities.
And some of the credit focused Etfs.
There is there's lower economics on those treasury Etfs that we track our benchmark and so that was a little bit of a mix shift impact for us as well within that.
AUM portion of the index business the rest of the index business did really well during the quarter up double digits again, some of the subscription revenue and pure subscription revenue. If you will in there. So so really just kind of the macro dynamics, taking hold there why you saw that sequential slight sequential decline.
Got it thanks for the update.
Thank you for your question. Our next question comes from Alex Kramm at UBS. Please go ahead.
Yes, Hey, good morning.
<unk>.
Info you gave already on the mortgage side, but would like to dig a little bit deeper in particular on the recurring side. So a few questions here one I.
Don't know if you gave an update to the recurring.
Revenue guide for that segment that would be interested if that's still unchanged.
Unchanged, but then more importantly, I think you mentioned that even make some of the challenges in the end market you've seen some bankruptcies et cetera. So maybe you could give us an update what you're seeing in terms of customer losses.
Can you remind us how the revenue model is if there are any.
Seats et cetera, and then I'm sorry.
Lastly, maybe.
Give us a little bit of the algorithm of growth that you've seen so far theyre going recurring revenues year to date between customer losses, but then also some of the up sales that you guys were talking about earlier and then also this continued shift to.
Moving the contract terms to more recurring so I know thats, a mouthful, but hopefully I got ahead of it.
Yeah.
Yes, that's a lot Alex this is Ben I'll start and Warren will also im sure at in here.
In terms of I'll start with just the overall challenges in the environment. If you if you take a step back and you look at what we're building we're building a business here that in mortgage with weather a number of different market environments with an eye towards an 8% to 10% growth.
Over the long haul.
And why are we confident in our ability to do that as the reasons are one we have absolutely mission critical software for these clients that we're providing.
We have long term contracts with our clients four to five years with a high amount of retention in them.
And we are heavily focused as you have seen in our results on shifting the revenue.
Two more and more towards recurring and we did it again this quarter on the backdrop of a 40% down market in terms of volumes.
With 18% year over year recurring revenue growth in the business.
Other proof point, you've seen in terms of being able to weather various market market environments, as our data and analytics line item with that being up 36% last quarter alone.
One of the one of the key inputs of drivers to that is our AI Q, an analyzer solutions, we're seeing tremendous uptake in that.
We're seeing clients now more than ever just looking to adopt automation to automate as much of the workflow as possible to lower their costs.
And the other proof points.
Out there was a comment Warren made in his prepared remarks in that if you look at Q2 of 2019 very similar volume environment to what we saw in.
This past quarter, we generated more than $100 million of.
Of revenue.
On a pro forma basis.
And Thats, what enables us to do that with enables us to do that as we do time studies with our clients and clients that adopt our full automation suite. We see are saving anywhere from 570 to $400 per loan that theyre manufacturing when they adopt our solutions so our.
<unk> to capture some benefit from that from the efficiencies that we're providing to the industry.
Has been tremendous.
In terms of the algorithm of growth on recurring revenue its really its a mix that we've described before it's a mix of there is some pricing in there there is some.
Sales to new clients. So I mentioned, we had a good start to the year for sales on encompass we've had a good sales.
Sales for the year on our <unk> business and then also the other input is that shift as customers are renewing that shift of even if we have to forego some transaction revenue of moving more to subscription we're continuing to do that and have a lot of success and we are still early days, we're really in the first year of a quantified program to do that.
And with contracts with clients going four to five years in the future we have a long runway to go.
Alex as Warren just you asked about the guidance. So you're correct. There is no change to the guidance that we gave at the start the year. We did assume as we said back then that there would be some headwinds from people potentially going out of business or maybe not as many new market participants I'll say I'm highly confident that to the extent that starts to play out that's going to be a cyclical trend.
A secular one because I think if you think about the process for them. This is reiterating what Ben said, if you think about the rest of getting a mortgage.
<unk> to be very costly for the consumer it's very inefficient and we have the tools that are building. The tools that are really solving those problems and so I don't know that probably doesn't help solve for 2022, EPS or 'twenty 'twenty for Etfs, but it should really factor into kind of the multiple people are thinking about when when you're valuing the overall enterprise.
So you haven't seen a lot of impact from cancellations at this point just just to clarify.
Hey, Alex it's been again, so we have seen.
A small small number of lenders that have had some challenges and potentially go out of business, but it's a very small number that we've seen so far.
Very good thank you.
Perfect. Thank you for your question. Our next question comes from Kyle Voigt of <unk>. Please go ahead.
Hi, good morning.
So last quarter, you spoke about any energy traders moving away from using futures and towards options at least for oil specifically.
Given the decline in oil futures open interest throughout <unk>. It seemed like that trend may have continued just wondering if you could talk about what youre seeing from commodity trading firms right now trying to manage risk in an extremely volatile environment.
Because I guess given the volatility we've seen in the market, it's a bit surprising to see energy volumes only up 3%.
In the second quarter, and now seemingly kind of trending lower year on year into the third quarter. Thank you.
Hey, Kyle it's Ben.
So you have a.
We have a confluence of issues that are going on around the world.
They are really unprecedented and.
Against that backdrop, we're pleased that our overall.
Our overall futures business is up both year over year in terms of open interest and since the end of the year and our energy business is up and open interest since the end of the year just given all of these all of these events.
<unk>.
What are we looking at we're looking at.
And inflationary environment, we're looking at a recession you have got in particular in Europe governments in Europe have to figure out the balance between sanctions against Russia. The impact of those sanctions against their civilians in terms of near term price impact on energy.
And moves towards cleaner energy. So you've got this that whole mix and then you also have in China continued coalbed blocked outs that are happening and obviously geopolitical tensions happening with China.
Given all of those issues, we believe that our marketplace has been setup.
As best as can be in the world to help clients navigate through all of these events and they're utilizing us to do that and I'll give I'll give a few examples.
First we have one of the most deep and liquid markets across that energy spectrum, So think of oil gas LNG power and environmental <unk>.
So as clients are looking to move and switch between fuels looking towards moving towards a cleaner environment.
The the exchange and clearing businesses that theyre going to do that.
Second.
And managing global supply shocks.
Have deep we have deep liquid global markets in each of those respective.
Asset classes that I mentioned with oil gas LNG power and environmental.
And enable customers because we have all the deep liquid points at the points of production and consumption as clients need to hedge their risks using different risk management tools, we're very well positioned to do that in a perfect example.
Right now with Russia.
Stifling gas supplies going into Europe , we are seeing U S step in in the U S, providing natural gas fire LNG cargos going into northern Europe .
And given that we are the home to the vast majority of commercial traders that trade our U S gas.
Products, both Henry hub at our basis markets, we're seeing clients use that to hedge those cargoes and it's one of the inputs that led to what I mentioned in my prepared remarks.
The record.
We've seen in market share from a Henry hub perspective, as well as our north American gas and at <unk>.
At a high as well in the global gas complex.
The third thing I'd point out is that we're engaged as much as ever with clients and governments around the world around these sanctions and as Theyre taking shape.
And there's no question it had some impact.
There is uncertainty as to how issues would play out in products like gas oil, where Russian fuel oil is an input into that historically.
As governments have made it clear that as of February of 'twenty, three Russian fuel oil will no longer be provided.
No longer be consumed in Europe , we've changed the specification on our gas oil contract and now we've started to see open interest and volume starting to build again in gas oil.
Under 'twenty three and beyond.
And then you pointed out our deep liquid offense market so options.
As.
Clearly one of the most efficient efficient ways to hedge geopolitical tail risk.
It helps to hedge a number of different.
Scenarios that could play out and in Brent our volume and open up our volume in Brent options year over year is up 25%.
So when you look at when you stand your lens and look at the overall energy complex, we feel really good about how we're positioned.
Okay.
Thank you so much.
Thank you for your question.
Our next question comes from Craig seen Jennifer at Bank of America. Please go ahead. Your line is open.
Hey, good morning, everyone.
Good morning.
So my question is on mortgage check origination revenues were down not that surprising.
Can you help us with some perspective on incremental downside from current levels and also in terms of timing when should we think fees revenues will stabilize and.
And any perspective on that relative to what rates are doing would be helpful.
Okay.
Hey, Craig its battle.
I'll start so.
Basically reiterate some of the things that I said before when you when you widen out what our strategy is.
Within the mortgage and mortgage technology business. Our strategy here has been to move more and more of the revenue towards recurring to take some of that cyclicality.
Out of the business and we continue to do that and we've been we've.
We've been successfully doing that in.
In terms of predicting the rate environment and how that's going to play out just look at how the rate environment has played out over the last week, it's been extraordinarily hard.
For it to see and be able to predict when.
This volume environment and stuff will will settle down but despite that we're going to continue to.
Make investments and the innovation that we're providing to our clients as we mentioned a lot of the investments that we made is what fueled that $100 million growth that we saw.
Over the last three years in a similar environment to what we had in 2019.
Our investment those investments.
In around in and around everything that we've been doing in the closing side are simple file business continues to gain market share in.
And do very well and then all of the innovation that we've been introducing on the data and analytics side with our.
With our IQ platform as well as the automation of the underwrite platform, we see that those are all.
Tailwind that regardless of the <unk>.
Rate environment, and the volume environment that are growth drivers for us.
And this is Jeff let me just mentioned that.
A lot of our mortgage strategy is driven by the fact that we're trying to really position the company to be an all weather named that.
<unk> interest rate and macroeconomic environments.
<unk> I can continue to end my prepared remarks on the same page that shows.
Ah graph of compounding earnings growth.
For shareholders and having.
A U S.
Mortgage strategy gives us exposure we have.
We own LIBOR, which is the London interbank an index.
Index, we we trade.
UK and EU inch.
Interest rate futures, we have our credit default swap business that is completely global that includes Russia.
Sovereign hedging and.
And companies across the globe, we have a fixed income business that is truly global we provide pricing data and almost every single.
Country that has bond issuance and we were relatively thin on having exposure to U S interest rates and and moving into mortgage gives us that.
I also think when we step back and look at the mortgage.
Complex the U S mortgage complex and the way we are building the business is that.
Is that there is a demographic of millennials that is huge that are underserved by homeownership and there has been supply chain issues during COVID-19 to meet.
And we generally believe that debt.
Any house that gets built will be sold and that there will be a mortgage on it and that the supply chain issues are getting better and that the underperformance of building is increasing.
We also have seen from our limited.
Our ownership of.
Having mortgage assets.
Cash out refinancings happen when the value of homes go up and which is an inflationary.
Input and.
And the one that I think.
A lot of people, who maybe is at the root of your question focus on is the absolute.
Interest rate, which leads to people refinancing.
Declining interest rate market.
Long story short is there are a number of inputs into the housing market, we want to have exposure to the U S interest rate environment.
It's going to help us build an all weather name and even with a downturn in the number of U S. Mortgages, we've had the best second quarter in our company's history.
Great. Thanks for taking my question.
Thank you for your question. Our next question comes from Brian Bedell Deutsche Bank. Please go ahead.
Great. Thanks, Good morning folks thanks for taking my question.
Two parter on the environmental.
Initiatives.
Maybe Ben if you could just comment on.
Within the energy complex, obviously, we're seeing very good strength in Nat gas, we did see a couple of quarters now of sequential declines in the environmental. So the question. There is are customers substituting Nat gas for some of the environmental.
Driving on the environmental side short term and then the second part of the question is if you could comment I don't know if its maybe lynn, but on the acquisition of or urgent him.
And the overall climate data strategy, whether youre seeing.
Seeking to get.
More.
To grow substantially in that business linking that into the data more heavily into the environmental trading side.
Yeah.
Got it.
Thanks, Brian I'll start and then ill.
And the second part of that.
So as I mentioned before that this confluence of issues going on.
In particular in Europe .
And where we have seen some impact so the balance between Russia and sanctions.
The impact on civilians.
And the move to cleaner energy.
In Europe , specifically, we have seen some time and attention from traders that would trade things like our EUA markets.
Our European Union allowances, moving and shifting more towards just the acute energy issues that are that everyone's faced with right. Now so we have seen some headwinds in that part.
But the flip side of it is in North America, we've had a very strong business continuing to do very very well North America is doing well and our regional greenhouse gas initiatives, our California carbon allowances are renewable fuels.
Our rec markets. Each of these are doing very very well and we're continuing to invest so we're yes. We recently launched biofuel contracts Theyre doing well, we recently launched a global index, the global carbon index future as well and we're getting more and more.
On the index itself, we're getting more etfs to license it and on futures.
We're starting to develop their we recently launched Texas wind and solar contracts, we recently launched nature based <unk>.
<unk> offset contracts for the for the voluntary market.
So we see a lot of tailwind.
Coming coming in the foreseeable future and you also have other developments like Penn State of Pennsylvania likely to join Reggie and Washington State likely to put in there a cap and trade program for the first time. So we have a lot of good tailwind there in North America, and I think what youre seeing in the overall complex. It's just wait a little bit on the EUA market in here.
<unk>.
And thanks, Brian for the question so given the strength in our fixed income data.
Equally positioned to add transparency around ESG.
Really focused on the climate risk.
Given our ability to tie alternative data sets into datasets that the market knows you've seen us further position. This offering in Q4, we announced the acquisition of risk and level of 11, which enabled us to execute on the opportunity to turn physical climate data and to act.
<unk> insight starting with our Muni bond service, but more recently expanding into mortgage backed securities market and now we have the ability to offer a parcel level information measured by geographic coordinates in the U S and we have plans to expand that globally and then finally as you know, we recently announced the purchase of <unk>.
Really expand our climate risk offering to include corporate transition risks given its coverage at 30000 public and private companies, which was an attractive.
Data set to us to add to the climate offering.
Okay.
Great color. Thank you.
Thank you for your question. Our next question comes from.
Alright.
Our next question comes from Michael hypothetical at this time. Please go ahead.
Great. Thanks, so much I wanted to ask about the commodities franchise. Just curious how you guys are thinking about the longer term growth drivers there what factors ultimately drive volumes higher and your commodities franchises at production of the underlying commodities for example, some more oil and gas rigs producing more oil and.
Gas are going to drive volumes higher over the long term. So just curious how you think about those growth drivers in the algorithm and how is that evolving.
Thanks, Michael.
It has been.
And the way we think about it is we need to have as I described earlier that breadth of offerings of global offerings across.
Each of the inputs into producing energy is as well.
Statistics that are out there point to energy consumption doubling between now and 2050.
And it's just what are the inputs into the production of that energy.
Change and will change over time, and we believe with the breadth of offerings that we have across oil.
Gas LNG power and then the.
Significant early start that we had in thinking about the environmental markets with the acquisition of the climate exchange over a decade ago, we're very well positioned to help clients navigate through that so that's one input into it.
You do have a global.
Focus on the reduction of carbon emissions around the world and as I said before with our environmental markets. We are very well positioned to help clients navigate through that so those are two I think the third is that even though we have had some.
Some near term headwinds in some of the products in Europe in particular, the ones that have been at the center of this Ukraine, Russia situation. We continue to see user growth. So we continue to see more and more users taking data subscriptions and coming onto the platform.
To get there.
Visibility to what's happening in those markets, how those markets correlate or D correlate at times to others around the world. So when we look at the underlying.
Health of the market looking at user growth looking at open interest and looking at the global breadth of the offerings that we provide to our clients those are all inputs into our growth algorithm.
Great. Thank you.
Okay.
Thank you for your question.
Our final question is a follow up from rich Repetto of Piper Sandler. Please go ahead.
Yeah. Thanks for taking the question.
Just one last question on mortgage and this I think is more for Jeff.
The prepared remarks.
It was mentioned about efficiency and automation and how the downturn.
Maybe emphasizing that.
More in the mortgage segment.
Yes. The question Jeff is.
I think people are really looking for.
The connection between mortgage and.
And how that can automate over time.
As you've done them.
<unk> and other market. So the question is how is it comparing given that mortgage has a longer workflow process, but what youre seeing so far in regards to the automation of the market.
Longer term versus the other asset classes you dealt with.
Sure Great question.
<unk>.
Because I'm a company founder I get asked to speak to entrepreneurs.
From time to time.
With Palomar the best time to start up businesses, when there's a downturn.
And not that that.
Having us moved into this space.
Asia downturn on anybody, but it's very very hard to get people in finance and I say this broadly whether it's trading clearing data acquisition is very very hard to get.
People in finance to change their behavior, when they're making a lot of money and when.
When things are going well and that's time to get people to think about making a change is when their businesses are under pressure and.
Ben alluded to that a number of times in in Y our subscription revenues are doing well in the mortgage space.
Broadly speaking.
Again I appreciate the question I know you followed our company for many years and.
You see us.
Putting data and analytic tools into the mortgage market.
The mortgage market that we are talking a lot about is the cash market you've seen us.
And I mentioned in my prepared remarks launch our first derivative product.
Against the New index that we created and so I think this space has a lot of inefficiencies throughout the entire not just the manufacturing of the mortgage but the way mortgages are financed.
And traded and re traded in the secondary market.
Very poor data available due to the paper based nature of the contract difficult to regulate for regulators regulators.
I think that there may be.
Biases in the market, but without the right data, it's very hard to know, it's very hard to correct for the participants in the market.
Very expensive for consumers.
Thanks.
That that spend a lot of money to core to consumer tend to lose them when theres, a refinancing or a change in that client's behavior of the market is not very thoughtful about keeping connectivity between those that land and those that borrow and all of that I think is fertile.
<unk> for Us and May May go.
For decades honestly.
As we build out the infrastructure, but epic.
Core we need a foundation.
Of.
Data and information that borrowers that lenders and that regulators can all look at and.
And used to to make it easier I think I may have mentioned.
To you even that it's.
Odd to me that that you can buy a completely consumable good you can buy toothpaste.
On an online platform and when you go to check out it'll ask you if you want to buy now and pay later.
Knowing that that an algorithm underwrote your credit against no collateral and yet it takes almost two months for somebody to refinance a mortgage and a house that they live in that has a foundation. That's in the ground that that has an address that you can see from space.
That is part of the.
<unk> hierarchy of needs of safety and security and will be will be abandoned by that person. The last thing they do and yet.
An existing mortgage talking to their bank takes two months.
It's just something is wrong in those equations and.
We could argue that.
The buy now pay later lending.
Maybe too generous, but certainly 60 days to do work with an existing client in an existing home just feels too long and Thats that is the challenge that I think we will.
Tackle successfully and and puts the entire industry on a better footing.
Got it thank you.
Thank you for your question.
We have received a follow up from Kyle Voigt of <unk>. Please.
Please go ahead.
Thanks for taking my follow up.
So a question on the OTC and other revenue line in the exchange segment.
Quite strong in the quarter I just wanted to confirm that the increase that we saw there was really driven by collateral fees that Ics clearinghouse.
If there is something else that was driving that and can you remind us if those collateral fees are entirely fixed basis point fees or if there is or will be any benefit from rate hikes, we've seen in the U S and EU.
Southern California, so in terms of the OTC another.
Yes, you are correct that the performance there has been collateral driven that that's largely from net interest income were earning at ice futures, it's clear U S in ice clear Europe .
And so as collateral balances move around and you've seen that over the course of this year. That's obviously going to benefit that particular line item in terms of rates moving higher we do have a benefit from that that's going to show up there more on the well it will show up on our Cds clearing side.
Because we do part some collateral and funds there at the fed and so we do get a benefit as collateral moves up but then also as fed fund rates move up there and so that's part of the strong performance, we've seen in Cvs or so.
In that OTC and other line, but in the spirit of your question, yes that theres a benefit from from.
Fed rate hikes coming through overtime.
Understood. Thanks.