Q1 2024 Intercontinental Exchange Inc Earnings Call
So the presentation you will have the opportunity to ask any questions, which you can do so by pressing star followed by the number one on your telephone keypad.
Now I'll hand over to Katja Gonzales manager of Investor Relations. Please go ahead.
Katia Gonzalez: Good morning.
Katia Gonzalez: First quarter 2024 earnings release and presentation can be brought in the investors section of <unk> com.
Katia Gonzalez: It will be archived and our call will be available for replay.
Katia Gonzalez: Today's call May contain forward looking statements. These statements, which we undertake no obligation to update represent our current judgment and are subject to risks assumptions and uncertainties.
Katia Gonzalez: For a description of the risks that could cause our results to differ materially from those described in forward looking statements. Please refer to our 2023 Form 10-K, 2024 first quarter Form 10-Q, and other filings with the SEC.
Katia Gonzalez: In our earnings supplement we refer to certain non-GAAP measures. We believe our non-GAAP measures are more reflective of our cash operations and core business performance.
Katia Gonzalez: Youll find a reconciliation to the equivalent GAAP terms in the earnings materials when used on this call net revenue refers to revenue net of transaction based expenses and adjusted earnings refers to adjusted diluted earnings per share.
Katia Gonzalez: Throughout this presentation unless otherwise indicated references to revenue growth are on a constant currency basis.
Katia Gonzalez: Please see the excellent Tory nodes on the second page of the earnings supplement for additional details regarding the definition of certain items.
Katia Gonzalez: With us on the call today are Jeff Sprecher Chair and CEO.
Katia Gonzalez: Warren Gardiner Chief Financial Officer.
Katia Gonzalez: Ben Jackson, President Lynn Martin President of NYSE, and Chris Edmonds President of fixed income and data services I'll now turn the call over to Warren.
Warren Gardiner: Scott Good morning, everyone and thank you for joining us today.
Warren Gardiner: On slide four with a summary of our strong first quarter results.
Warren Gardiner: First quarter net revenues totaled a record $2 3 billion.
Warren: And pro forma for the acquisition of Black Knight increased by 5% versus last year.
Warren Gardiner: First quarter adjusted operating expenses totaled $930 million.
Warren: Low end of our guidance range, driven by an acceleration of planned expense synergies and a few one time benefits within compensation costs.
Warren: Moving to the balance of the year, we expect second quarter adjusted operating expenses to be in the range of $945 million to $955 million with a sequential increase driven in part by a full quarter of merit increases across the organization planned investments in the modernization of MSP and higher DNA as recent <unk>.
Warren: Related to data center investments go lives.
Warren: In addition, and in part due to synergies being realized sooner than previously expected. We are lowering our full year expense guidance to $3 79 billion to $3 $82 billion.
Warren: This strong first quarter performance helped to drive record adjusted operating income of $1 4 billion up 8% year over year on a pro forma basis and record earnings per share of $1 48.
Warren: First quarter free cash flow totaled 877 million and.
Warren: Enabling us to reduce debt outstanding by roughly $600 million in the first quarter.
Warren: Since we completed our acquisition of Black Knight in September we've reduced debt by roughly $2 billion.
Warren: And as a result, adjusted leverage ended the first quarter approximately three nine times pro forma EBITDA with first quarter interest expense down $10 million from the fourth quarter.
Warren: Now, let's move to slide five will provide an overview of the performance of our exchange segments.
Warren: First quarter net revenues totaled a record $1 2 billion up 11% year over year.
Warren: Record transaction revenues of $866 million were up 16% in part driven by a 12% increase in our interest rate business and record energy revenues, which grew 32% year over year.
Warren: This strong performance included a 28% increase in our oil complex.
Warren: 42% growth in global natural gas revenues, driven by a record another record setting quarter for TTS and 26% growth in our environmental business.
Warren: In addition, as of the end of April open interest is up 23% year over year, including 22% growth in our global commodities and 25% growth in our energy markets.
Warren: Shifting to recurring revenues, which include our exchange data services and our NYSE listings business revenue totaled $357 million in the first quarter.
Warren: Similar to last quarter growth in the number of customers consuming our global energy environmental data was partially offset by the rolling off of initial listing fees related to the strong IPO market in 2021, and lower exchange data revenue at the NYSE.
Warren: It's worth noting that the IPO market has shown signs of improvement so far in 2024 with the NYSE, capturing nearly 70% of total proceeds raise and welcoming six of the top seven ipos year to date, despite more than 50% of new listings not meeting our gold standard of qualification criteria.
Speaker Change: Turning now to slide six I'll discuss our fixed income and data services segment.
Warren: First quarter revenues totaled a record $568 million.
Warren: Transaction revenues of $119 million were driven by growth in corporate bond trading which was in part driven by strong growth within our institutional channel. This was offset by lower treasury and CD volumes as well as lower levels of Cds clearing activity.
Warren: Record recurring revenues totaled $449 million and grew by 4% year over year.
Warren: In our fixed income and data and analytics business record first quarter revenues of $288 million increased by 4%.
Warren: Growth was once again, driven by improving trends in our <unk> business and another quarter of double digit growth in our index business.
Warren: Importantly, fixed income data and analytics asps or annual subscription value improved from the 2% range experienced through much of 2023% to 4% exiting the first quarter.
Warren: As we continue to see customer reengagement and investment across the fixed income ecosystem.
Warren: Other data and network services grew 4% in the first quarter driven by our feeds business and continued strength in our oil and gas desktop solutions, both of which grew double digits year over year.
Warren: Importantly demand for our connectivity solutions remained strong with a backlog of signatures related to our ice global network offering expected to come online and into both Asps and revenue in early July following the build out of additional data center capacity.
Warren: As a result, we expect second quarter year over year growth and overall recurring revenue to be similar to the first quarter with year over year growth improving in the second half driven by continued strong trends across fixed income data and analytics and an acceleration in growth in our other data and network services businesses.
Warren: Please flip to slide seven where I will discuss the results in our mortgage technology segment. Please.
Warren: Please note that my comments are on a pro forma basis.
Warren: Ice mortgage technology revenues totaled $499 million in the first quarter.
Warren: Recurring revenues totaled 390 billion.
Warren: As we noted last quarter recurring revenues were impacted by both industry consolidation and continued pressure on renewals within our origination technology business.
Warren: It's worth noting that while current macro conditions are putting pressure on minimums that renewal and thus our recurring revenues customers are overwhelmingly remaining on our platform.
Warren: And while yet to manifest in our results lower minimums. Upon renewal are paired with a higher price per transaction, a dynamic that will provide an incremental tailwind when industry volumes normalize said differently total contract value in a normal market is on average increasing upon renewal.
Warren: Transaction revenue sold $109 million in the first quarter for closed loans increased slightly this was offset by lower professional services fees and lower default management revenues within our servicing business.
Warren: Importantly, as I previously indicated we have realized expense synergies faster than originally anticipated, which when coupled with relatively stable top line on a year over year basis, It's helped to drive an 8% increase in segment operating income.
Warren: Looking to the full year and after factoring in the dramatic shift in interest rate expectations for 2024 relative to just three months ago. We now expect total revenue growth in our mortgage technology business to be flat to down in the low single digit range with revenues unlikely to improve materially from the first quarter levels until the second half.
Warren: The high end of the range is underpinned by a flat to modest improvement in industry origination volumes or the lower end of the range anticipates a more conservative decline in the mid to high single digit range relative to 2023.
Warren: Despite these macro pressures, we continue to invest in product development and enhancement, we continue to expand our existing networks and we are executing on our synergy targets all of which further position our platform to realize accelerating growth when market conditions normalize.
Warren: In summary, we delivered another very strong start to the year.
Warren: We once again delivered strong revenue operating income free cash flow and adjusted earnings per share growth and we continue to invest across our business to be to meet both the needs of our customers and to position our business to continue to deliver consistent and compounding growth for our stockholders into the future.
Warren: I'll be happy to take your questions during Q&A, but for now I'll hand, it over to Ben.
Benjamin R. Jackson: Thank you Lauren and thank you all for joining US. This morning, please turn to slide eight.
Benjamin R. Jackson: Our customers continue to rely on our leading technology mission critical data and transparent and accessible market to navigate uncertainty while managing risk.
Benjamin R. Jackson: Across our global futures and options business total average daily volumes increased 16% to a record $8 1 million loss in the first quarter, including records across commodities energy and total options.
Warren: This strong performance drove record futures and options revenues with energy revenues nearly tripling since the same period in 2010 and growing double digits on average over that timeframe.
Warren: And through April open interest across our global commodities and energy markets remains at all time highs up 22% and 25% respectively.
Warren: Versus last year.
Warren: A direct benefit from the long tail of secular growth trends unfolding across global oil natural gas and environmental markets.
Warren: A number of years ago, we recognize the importance of investing in an energy platform that is truly global one that better serves the needs of an evolving and growing commercial customer base.
Warren: Today as a result of organic and inorganic investments trading on our network is not tied to any single product or limited to any one region. Instead, we have built a diversified energy network delivering comprehensive risk management solutions, providing capital efficiencies and positioned to grow alongside.
Warren: <unk> the continued evolution of global markets.
Warren: In our oil markets as trade dynamics evolve and become increasingly complex customers seek not only liquidity in the global major global benchmarks, but also in products that provide for greater hedging precision.
Warren: Reflecting this dynamic our other crude and refined products continue to set records with Adv growing double digits on average over the past five years.
Warren: This portfolio increased 47% year over year in the first quarter alone while open interest is up 27% through the end of April.
Warren: And the more than 20 years that ice has been building its global energy platform. We have created hundreds of precise hedging instruments driven by collaboration with our customers. All of these instruments are underpinned by the deep liquidity in our benchmarks such as brand.
Warren: In March 2021, and partnership with the Abu Dhabi National Oil company and nine of the world's largest energy traders as founding partners, we launched ice futures Abu Dhabi or iPad.
Warren: This new exchange enabled for the first time.
Warren: Market participants to come together and contribute to the price formation of a new innovation suburban futures contract and.
Warren: An important benchmark for oil flowing to Asia.
Warren: In the first quarter as iPad marked its third anniversary.
Warren: <unk> futures reached new highs, surpassing over 1 million contracts traded along with a series of open interest records in April.
Warren: Similarly, our platts Dubai contract had another quarter of record volumes increased increasing 58% year over year.
Warren: Another innovation that we launched two years ago, the Midland <unk> contract known as <unk> is a deliverable crude grade of Midland oil basis Houston.
Warren: This contract is fast becoming the most accurate representation of the Houston oil market as evidenced by <unk>, reaching record volumes during the quarter.
Warren: Further supporting the growth of this new risk management innovation is that this oil has been added into the ice Brent basket.
Warren: Which creates new opportunities for clients to manage risk by hedging with this contract.
Warren: Collectively this strong performance drove another quarter of record oil revenues of 28% year over year.
Warren: In our natural gas markets, the globalization of gas and the rise of LNG are secular trends, we began investing in over a decade ago, beginning with our index investment.
Warren: An investment that has established us as a leader in European gas trading.
Warren: Today with Asia as the largest buyer of global LNG the relationship between our European TTS and Asian, GKN benchmarks drives global price formation.
Warren: In the first quarter the number of market participants in each market grew double digits versus last year with both reaching record volumes.
Warren: This strong performance drove record natural gas revenues up 42% year over year in the first quarter.
Warren: Importantly, open interest trends for TTS and <unk> remained strong through April up, 90% and 50% year over year, respectively.
Warren: The globalization of natural gas alongside our global focus on Decarbonization is critical to environmental markets.
Warren: Built off of our acquisition of the climate exchange more than a decade ago, we operate the world's largest and most liquid environmental markets.
Warren: Here, we have seen the number of active market participants growth double digits on average over the past five years, including record participation in the first quarter.
Warren: At the same time Adv across our environmental portfolio increased 22% year over year with open interest up 27% through the end of April.
Warren: Price transparency across the energy spectrum is critical as companies look to reduce their greenhouse gas emissions in a cost effective manner.
Warren: By combining the network and liquidity of our global energy platform with our leading environmental portfolio, we are well positioned to help our customers navigate this transition across global energy markets.
Warren: In summary, the evolution of our energy markets is one example of how we continuously invest and develop customer driven solutions across asset classes as.
Warren: As well as the creative approach, we've taken to leverage our infrastructure technology and expertise to drive value creation.
Warren: Our record performance is a product of these investments some that we've made more than a decade ago and our commitment to staying close to our customers and approach that permeates this organization, helping to drive effective and efficient product innovation.
Warren: This approach is also important to our data business, where we are uniquely positioned to leverage our distribution and our infrastructure to create new content and to expand the breadth of our offerings.
Warren: Our position as a leading provider of price and reference data has served as the foundation for what is today one of the largest providers of fixed income indices globally.
Warren: The accelerating growth of passive investing and the efforts we've made to increase the breadth of our offerings and the flexibility of our approach to index. Construction has contributed to the double digit average annual growth in our index business. Since we acquired the Bank of America Merrill Lynch franchise in 2000.
Warren: 17.
Warren: A key driver of this growth is the increase in the passive ETF assets under management Benchmarked to our indices growing to a record of 593 billion through the end of the first quarter from less than $100 billion in 2017.
Warren: While critical or pricing data and index businesses are only components of what we offer to this growing industry.
Warren: As a leading provider of such proprietary data services, we have developed deep expertise in gathering and cleansing unstructured data.
Warren: Skills and building the database that serves as the foundation for developing actionable insights and identifying opportunities not only in the fixed income markets put across many other asset classes.
Warren: This is an expertise we're starting to leverage across a number of mortgage data initiatives for.
Warren: For example in April we announced the integration of our property and loan level mortgage datasets with our property level climate risk metrics covering more than 100 million U S homes.
Warren: This integration improves transparency and facilitates risk management throughout the housing finance and property insurance sector, allowing customers to apply ice's climate metrics to individual loans properties and entire portfolios improving the visibility to the inherent climate risks in each.
Warren: In addition, we are leveraging these insights to enhance asset level climate risk modeling for existing municipal bonds and mortgage backed securities products.
Warren: As we move forward there is significant opportunity to continue to expand and evolve the products and services within our fixed income and data services business.
Warren: Turning now to our mortgage business.
Warren: Following the proven playbook, we've applied across our global energy and fixed income businesses and mortgages, we are leveraging market, leading technology mission critical data in our network expertise to build innovative solutions that improve workflow efficiencies.
Warren: With a touch point to nearly every market participant we have connectivity to a customer base in need of the automation that our digital solutions provide.
Warren: In this regard.
Warren: We're pleased to share that we closed 20, new encompass clients in the first quarter.
Warren: Building on the wins, we announced last year with banks, such as <unk> and JP Morgan Chase and the announcement earlier this year of adding fifth third bank to encompass on top of their move to MSP announced late last year. We are pleased to now announce that citizens bank and Webster Bank.
Warren: Both existing MSP clients are moving to encompass.
Warren: Just like many of the other recent wins that we are implementing these clients to see the significant value that we can provide through our complete front to back offering.
Warren: For MSP.
Warren: Building on the capital mortgage solutions of Texas, and Capex credit Union wins mentioned on the last call. We closed <unk> a longtime encompass client.
Warren: Our growing customer relationships serve as a validation of our vision, bringing together a complete front to back experience for our customers and their clients through one trusted platform.
Warren: Our clients seek a solution provider that supports digital workflows throughout the homeownership lifecycle, starting with matching our consumer to the right lending product at the right time on.
Warren: On the loan origination.
Warren: Closing servicing in the capital markets. This is directly in line with our long term vision and the journey we have better.
Warren: Importantly, we remain focused on executing on our strategy of relieving the pain points and inefficiencies that exist across the mortgage workflows and remain committed to investing behind secular growth, while enhancing the value proposition of our network.
Warren: For example, we have completed the evolution of encompass to a new web user experience with new automation tools and more ways to partner and extend the platform to serve our customers business needs.
Warren: Parallel we are executing on our investment commitments to continue to advance our market, leading MSP servicing platform.
Warren: A perfect example of this execution is the recently announced rollout of our MSP digital experience or MSP Dx. This service is an intuitive and conversational new interface leveraging natural language processing for our servicing system designed to streamline workflows.
Warren: Kris efficiencies and expedite training of new servicing personnel.
Warren: Along the same lines, we've completed our first integration of encompass to MSP.
Warren: This integration Leverages, our data and document automation platform and our neural network large language model for the classification and extraction of data from documents to automate loan onboarding from encompass straight to MSP, reducing errors and providing significant efficiencies to clients that have.
Warren: Our front to back solution set.
Warren: Simultaneously, we've been integrating our tax flood and closing fees into encompass providing lenders more choice in service providers for these important underwriting data assets.
Warren: In summary, as we move through 2024 and beyond we are excited about the many opportunities for growth that lie ahead.
Warren: <unk> that we're able to capture because of the investments we've made in the past and the strategic investments, we will continue to make across our networks into the future.
Warren: With that I'll turn the call over to Jeff.
Jeffrey C. Sprecher: Thank you Ben good morning, everyone and thank you for joining US please turn to slide nine.
Jeffrey C. Sprecher: We are increasingly being asked how ice is incorporating artificial intelligence into our business.
Jeffrey C. Sprecher: So while I'm not here to discuss the financial impact I thought I would touch on some of the AI investments across sites.
Jeffrey C. Sprecher: Like many large corporations, we have developers working on how to integrate AI models into our products on how we better contract for and monetize our proprietary datasets and on how we improve our own productivity.
Jeffrey C. Sprecher: Along those lines, we've created an internal R&D group that we're calling our AI center of excellence, where we're testing novel use cases, and working to build appropriate governance guardrails to reduce or eliminate the risks inherent to AI.
Jeffrey C. Sprecher: We are focused on getting it right while working towards the goal of bringing AI enabled enhancements and new products to our customers.
Jeffrey C. Sprecher: Then just spoke about investing in our mortgage data and document automation product, which is an extension of the product formerly called the IQ that we acquired with Ellie Mae.
Jeffrey C. Sprecher: We've also mentioned investing in our commodity chat platform called ice chat to improve upon actionable insights and market data and we've commented on our work using artificial intelligence models for pattern recognition and our regulatory compliance activities.
Jeffrey C. Sprecher: Today I'd like to further speak to some of the lesser known second order impacts of the market's current energetic focus on AI that we see beating growth to ice.
Jeffrey C. Sprecher: If you think back to the start of ice the prevalent financial exchanges were largely open outcry venues and both listed and over the counter trading involve significant involvement of human intermediaries.
Jeffrey C. Sprecher: Our thesis of using digital networks that connect people and broaden access to risk management pushed us to create and manage our own data centers and network channels.
Jeffrey C. Sprecher: Today, we operate from 14 global data centers and we've built out the ice cloud managed network connecting our data centers to many third party trading and data venues and interconnecting major players across the global financial services industry.
Jeffrey C. Sprecher: We've made the determination that managing our own it infrastructure and making it available to our customers directly and through an ice managed cloud offers us a competitive advantage, while providing for better intellectual property protection and creating an avenue for our connectivity and data revenue growth.
Jeffrey C. Sprecher: One service that we offer our customers is the ability to utilize their code and equipment within the ice global network and transmit the digital output across the ice managed cloud.
Jeffrey C. Sprecher: This ice strategy has resulted in requests from customers to incorporate their AI models inside of our network and is driving increasing demand for ice data center and ice cloud access.
Jeffrey C. Sprecher: We've already received customer deposits or much of our planned year 2025, and year 2026 network build outs and we've been working with our vendors to plan for its continued expansion.
Jeffrey C. Sprecher: This customer interest in artificial intelligence modeling should provide a multiyear tailwind to revenue growth in our data and connectivity business.
Jeffrey C. Sprecher: Another second order revenue impact from the current interest in AI is the attention that are listed emissions offset markets and our listed renewable energy markets are receiving from power companies and third party data center developers as they plan for their future growth given that ice has a major hosted the world tradeable emission and renewable energy.
Jeffrey C. Sprecher: <unk>.
Jeffrey C. Sprecher: Our subsidiary Ice benchmark administration, which administers regulated benchmarks manages our carbon market data service that provides validated data to companies seeking information about the voluntary markets for carbon credits into.
Jeffrey C. Sprecher: Interest in these markets is surging as evidenced by corporate involvement more than doubling over the past six months to more than 250 firms.
Jeffrey C. Sprecher: And last month, the United Nations Science based target initiative, the world's main verifier of emissions targets said that it will permit the use of emission offset credits to count towards reducing emissions against scope three targets.
Jeffrey C. Sprecher: Coupled with the European Commission's aimed to increase its emissions reductions beginning in 2024, plus the eu's inclusion of new industrial sectors that will be subject to these targets. We believe the backdrop for revenue growth in Ics, environmental and renewable markets attributable to AI model demand.
Jeffrey C. Sprecher: <unk> remains bright.
Jeffrey C. Sprecher: Shifting now to our strong results in the first quarter. We once again grew revenues grew adjusted operating income and grew adjusted earnings per share yet.
Jeffrey C. Sprecher: Yet again, delivering the best quarter in our company's history.
Jeffrey C. Sprecher: Our consistent results are a testament to the value of our mission critical data, leading market technology and the strength of our strategic business model.
Jeffrey C. Sprecher: This is a company that has deliberately grown through curated acquisition and entrepreneurship we.
Jeffrey C. Sprecher: We have targeted an interrelated collection of markets to help our customers manage risks due to both acts of nature and acts of man.
Jeffrey C. Sprecher: Typically we think of our global commodity oriented businesses is being levered to acts of nature, such as issues that affect supply chain flows.
Jeffrey C. Sprecher: We think of our global financially oriented risk management businesses as being Levered to acts of man, such as Central Bank and cross border trade policies.
Jeffrey C. Sprecher: We purposely have targeted providing a mix of these businesses defined growth somewhere in the world in varying underlying conditions and we have intentionally positioned our company to provide customer solutions to facilitate all weather results such as those we are reporting for this record quarter.
Jeffrey C. Sprecher: I'd like to end my prepared remarks by thanking our customers for their continued business and for their trust in <unk>.
Speaker Change: I'd like to thank my colleagues at ice for their contributions to our best ever quarterly results.
Speaker Change: And with that I'll now turn the call back to our moderator Emily and we will conduct a question and answer session until 930, a M eastern time.
Emily: As a reminder, if you would like to ask a question today. Please do so now by pressing star followed by the number one on your telephone keypad.
Emily: Have you changed your mind or you feel like your question has already been answered you can release yourself from the queue by pressing star and then Kate.
Emily: I ask that you. Please limit yourself to one question only please rejoin the queue for any follow ups.
Emily: Our first question today comes from the line of Ken Worthington with JP Morgan.
Kenneth Worthington: Please go ahead.
Kenneth Worthington: Hi, good morning, and thanks for taking the question I wanted to dig a bit more into the globalization of gas. So a couple of questions. Here <unk> is surging in TTS volume growth remains very strong how far along is this period of rapid growth for TTS and is it really being driven by the globalization of gas.
Emily: Or is there something else driving this most recent surge.
Emily: And then can you address the extent to which the buying administration pause of LNG export licenses could impact the globalization of gas it feels like a speed bump along the way.
Emily: Right.
Emily: Does like a Republican president changed the equation. Thanks.
Emily: Hi, Ken it's Ben Thanks for the thanks for the question.
Benjamin R. Jackson: I'll take the first part of your question first then I'll hit the second part.
Benjamin R. Jackson: In terms of natural gas.
Benjamin R. Jackson: We believe that TTM has a long long runway to go in and what really fundamentally changes that natural gas has been liberalized, it's no longer wedded to just pipeline flows and it can now move freely around the world in the form of LNG and there has been massive investments.
Benjamin R. Jackson: LNG terminals and Regasification terminals around the world that have really changed and evolved.
Benjamin R. Jackson: Gas into a global.
Benjamin R. Jackson: A global commodity and Tcf has emerged as the global way to hedge that risk.
Benjamin R. Jackson: And if you look at all the risks around the world right now and across Europe, and the U S.
Benjamin R. Jackson: We believe that <unk>.
Benjamin R. Jackson: You need to have not only benchmark products, but you also have to have.
Benjamin R. Jackson: Products that enable people to manage risk at more precise hedging locations as well in parallel to products like TTS.
Benjamin R. Jackson: Right now you look at the dynamics of the <unk>.
Benjamin R. Jackson: European gas markets have recovered to some degree with U S. LNG now flowing into Europe, you've got Regasification terminals that have come online in Germany in the Netherlands that have helped storage has been at high levels. This past.
Benjamin R. Jackson: This past winter, we had a mild winter in Europe, but you still have a backdrop of geopolitical risks that introduce.
Benjamin R. Jackson: Tail risks and ongoing risk to energy supply that are going to continue to evolve supply chains around the natural gas market and now that gas can move freely we think theres going to be a tremendous amount of opportunities for clients to use our products to hedge all of those risks the confluence of those risks.
Benjamin R. Jackson: And as those things change and evolve and as you pointed out.
Benjamin R. Jackson: Tcf has had.
Benjamin R. Jackson: It has had a tremendous runway here are open interest is up 90% year over year and volumes are up 60%.
Benjamin R. Jackson: In terms of the Whitehouse pausing on new permits for LNG exports from the U S. We see this as just another speed bump you used the right word along the way that market participants have to look at and determine what risk does this introduce to me. It takes years for this to have an <unk>.
Benjamin R. Jackson: Impact permits that are in place now will take years to come online. So it's more of a longer term.
Benjamin R. Jackson: Implication for the market to absorb but on the same token do you have a new LNG terminal coming online in Canada. Soon so youre going to continue to see.
Benjamin R. Jackson: LNG is its been liberalized move around the world that risk needs to be managed in TTS as the fundamental place that it's done.
Speaker Change: Great. Thank you.
Speaker Change: Our next question comes from Benjamin <unk> with Barclays. Please go ahead.
Benjamin: Hi, good morning, and thanks for taking the question I was wondering if you could touch on the IMT revised guidance to what extent is your view on the transaction based opportunity dependent on or based on changes in the MBA forecast or Warren I think you mentioned the change in the interest rate outlook over the course of the year how much of that.
Benjamin: Those two pieces sort of impacting what that business could look like you have the supply and demand for housing versus interest rates, making the environment less affordable and then on the.
Speaker Change: On the recurring revenue side it sounds like the negotiations were a little bit tougher in terms of minimum transit minimum contract levels any commentary on the overall health of the customer base. It sounds like churn is quite low but any other color there would be helpful. Thank you.
Speaker Change: Sure Ben let me start on that transaction I'm going to turn to <unk> to give you some color more on what's going on with the customer front. So so yes, you are correct. When we thought about guidance last quarter and we gave you that guidance at the high end of that range really with baking in what some of the forecasters were giving you in terms of what they thought the year was going to look like and we wanted to build in towards the lower end of that range, a little bit more of a <unk>.
Speaker Change: <unk> outlook.
Speaker Change: <unk> seen that they brought those down as well and that actually now so that same framework was how we were thinking about this as we've revised guidance this quarter, because we've now taken it down sort of similar or at least at the high end towards where theyre sitting at the moment and then we wanted to put a little bit more of a conservative bent on it.
Speaker Change: Towards the lower end of that range as we move forward. There's obviously a lot of uncertainty around the trajectory of interest rates and therefore mortgage bonds are going to look like as.
Speaker Change: As we move through the balance of the year and so that was how we were thinking about it from an origination standpoint, and just the macro impact that that has on the customer base.
Speaker Change: Think about making decisions and things of that nature.
Speaker Change: Hey, Bert ill follow up on the second part of your second part of your question there we.
Bert: 100% conviction on the ability for this business to grow over the long term and we've continued.
Bert: Quarter over quarter to just give more and more evidenced the fact with just customer wins that are that are coming on board. So we feel great that even in this.
Bert: This volume environment that is an environment that hasnt been seen almost in a generation since 1991.
Bert: We're continuing to bring customers onto our platform into our ecosystem.
Bert: And continuing to gain.
Bert: In that area.
Bert: Couple of things I mean, obviously in this past quarter.
Bert: The industry shifted from a rate cut expectation of five to six cuts in 2024 to what seems like now is one maybe two and this happened rapidly.
Bert: So were watching and monitoring what's happening with our clients as a result of that.
Bert: The couple of things I'd point out customers are renewing and renewing at very high levels on.
Bert: On the renewal front, we're seeing almost of a repeat of what we've seen and what I've talked about in several quarters now.
Bert: The majority of our customers are renewing in the renewing at higher minimums higher subscription levels.
Bert: But we are seeing some percentage of those customers that are choosing to renew with lower minimums lower subscriptions, but the tradeoff. There is consistently a higher per closed loan fee.
Bert: And our objective on all of these renewals, which were achieving is to increase the total contract value that these customers on regardless of which way.
Bert: They go in that in that negotiation based on the value that we're continuing to provide with all the new innovation that we're introducing.
Bert: Into the marketplace.
Bert: So in terms of renewals, we're not really seeing a significant change on the sales front. We continue to have great sales success I just mentioned several new wins on top of other wins that we've announced recently with the citizens Bank.
Bert: And Webster Bank. So we feel good about the funnel what's unknown in what we're just watching closely is that just given how fast rate expectations changed a lot of our market participants want market stability and want you want a view as to when Theyre going to get return on investments. So we're watching closely to see our sales cycles go into potentially lengthened.
Bert: But for the most part we are seeing customers continuing to take this time, while the tide is out to invest in this critical infrastructure. So that when the tide comes back and they are well positioned to capitalize on them.
Speaker Change: Alright, Thank you very much.
Speaker Change: Our next question comes from Patrick Donnelly with Piper Sandler. Please go ahead, Patrick Your line is open.
Speaker Change: Yes.
Patrick Malcolm Moley: The question was.
Patrick Malcolm Moley: I was hoping that you could just provide an overview of progress update on your efforts to build out institutional connectivity in the fixed income and data services business and then secondly can you help us understand the institutional opportunity there.
Speaker Change: Our status strategy, just promote inorganic inorganic standpoint thanks.
Speaker Change: Hi, This is Lynn Martin Thanks, so much for the question. So we are incredibly excited.
Lynn C. Martin: The opportunity to continue to build out the institutional.
Lynn C. Martin: <unk>.
Lynn C. Martin: Across our fixed income and data services segment.
Lynn C. Martin: Now.
Lynn C. Martin: Part of the reason why we're so excited is because we have seen the adoption on the institutional side in our Muni execution business in particular continued to grow with a 68%.
Lynn C. Martin: CAGR over the last two years.
Lynn C. Martin: And because of the way we have deliberately curated our data assets. We think there is still room to continue to grow given the success, we've had with institutional adoption, particularly in our index business.
Lynn C. Martin: Our index business as Ben mentioned earlier in his prepared remarks.
Lynn C. Martin: Now at a record roughly $600 billion in AUM that benchmark against our index business I'm going to turn it to my colleague Chris to give you some more color on the progress. He has made since he stepped into the role.
Christopher Scott Edmonds: Yes, Thanks Lynn.
Christopher Scott Edmonds: <unk> thanks for the question.
Christopher Scott Edmonds: As seen from being in the role since January one.
Christopher Scott Edmonds: Is this the opportunity on the execution side for us.
Christopher Scott Edmonds: To draw closer what we're seeing in the development of SMA or separate managed accounts to the institutional trading that's going on there is a deep desire across the street to get closer to those two pools of liquidity and we are uniquely positioned to provide that opportunity and as Lynne mentioned, bringing the data. So everyone's looking at exactly the same marks and.
Lynn C. Martin: And valuations for those.
Lynn C. Martin: Transaction values has been an important way for us to step up to the plate and provide that solution that is unique across the street.
Lynn C. Martin: And available to us and our clients.
Speaker Change: Okay. Thanks for the color.
Lynn C. Martin: Our next question comes from Dan Fannon with Jefferies. Please go ahead.
Lynn C. Martin: Yes.
Daniel Thomas Fannon: Thanks, Good morning, I wanted to follow up on mortgage you guys. Obviously, you are having a lot of success in signing up large financial institutions over the last several quarters, how do we think about the on ramp and the revenue contribution of some of these larger firms.
Daniel Thomas Fannon: And also separately on the servicing side there was some decline both year over year and quarter over quarter and I wanted to understand why the recurring portion of some of that business Thats legacy Black Knight is also under a bit of pressure.
Speaker Change: Thanks, Dan it's bad.
Lynn C. Martin: In terms of.
Speaker Change: These large clients that we that we sign it does take time to implement them.
Lynn C. Martin: These systems are core to their operations there is a high amount of compliance that's.
Lynn C. Martin: Thats managed through these through these applications. So it takes time to bed them down and highly regulated companies.
Lynn C. Martin: So.
Lynn C. Martin: So it is going to take time for those to flow through but many of them as they as we have been announcing a lot of these wins.
Lynn C. Martin: Through last year.
Lynn C. Martin: I was going to start playing out towards the latter part of this year and into next year, you'll start seeing contribution.
Lynn C. Martin: Of those.
Lynn C. Martin: On the servicing side the servicing business is doing is doing very well.
Lynn C. Martin: From our perspective.
Lynn C. Martin: We we and we mentioned in our last call is that there has been some industry consolidation.
Lynn C. Martin: That did impact a little bit in Q1.
Lynn C. Martin: You do have msr's mortgage servicing rights that do switch at times between sub Servicers. Some that are on MSP and some that are not on MSP.
Lynn C. Martin: And we saw some of that again in Q1, but the net effect is basically nets out.
Lynn C. Martin: One change we did see was in this past quarter was we did see an acceleration from one of the large depository thats.
Lynn C. Martin: Been very public.
Lynn C. Martin: Wind to sell some of what they saw as they are non strategic MSR is that came through their correspondent channel. So we saw an acceleration of that we see that as a temporary temporary thing.
Lynn C. Martin: But overall on MSP, we have a record number of clients that are on MSP with 94 clients and we have 13.
Lynn C. Martin: Clients that are going through implementations many of that many of these are ones that we've announced since we closed on black Knight and if it really accelerated the ability to pick up a lot of these clients.
Lynn C. Martin: Second thing I'd point out is that on the servicing side I'm really pleased with our execution in terms of modernizing that technology stack I mentioned in my prepared remarks.
Lynn C. Martin: New natural language processing.
Lynn C. Martin: Based platform and MSP Dx, so the whole interface that the clients who used to interface that with the servicing system has been overhauled already.
Lynn C. Martin: As I mentioned on our prior call we embedded the simplified platform into the back end of MSP to automate the process of releasing liens. So really unique position we're in to automate that with with the platform that we have and simplified.
Lynn C. Martin: <unk>.
Lynn C. Martin: Mentioned in my prepared remarks, we've integrated encompass to MSP, leveraging our data and document automation platform.
Lynn C. Martin: And the last thing I'd point out is a lot of these encompass wins that I keep mentioning or are clients that are on MSP Webster and citizens Bank are two perfect examples where they are on MSP and the clients see the efficiency and the vision that the efficiency that we provide and the vision of where we're going.
Lynn C. Martin: Really helping us pull through encompass wins, so we feel great about the positioning of <unk>.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Chris Allen with Stifel. Please go ahead.
Lynn C. Martin: Yes.
Christopher John Allen: Yes. Good morning, everyone. Thanks, Thanks for taking my question I wanted to dig in a little bit more.
Christopher John Allen: On the fixed income business.
Christopher John Allen: Believe me as noted in the prepared remarks investment, but investments by clients in the business. So maybe some color there and I believe you.
Christopher John Allen: With the new leadership in the business you are taking efforts to kind of reinvigorate the sales process.
Christopher John Allen: Where you are with that do you think youre fully up to speed and have improved the tons of sales and retention.
Christopher John Allen: Focus.
Christopher John Allen: <unk> spoken to before.
Chris: Hi, its Chris.
Christopher Scott Edmonds: What I would tell you that I've seen since.
Chris: Since taking on the role is to really things, one macro and one I think related to us.
Christopher Scott Edmonds: Certainly there is a focus on the client base to find the most comprehensive solution set that's available and theyre looking for opportunities around there to tie that into single or very few vendors to provide that and we also made a change in how we have service to clients.
Christopher Scott Edmonds: January and so we move to <unk>.
Christopher Scott Edmonds: <unk> structure within the team itself and I'm very proud of the team and the results they produce from that.
Christopher Scott Edmonds: Because they're much closer to the clients. These days and those two things coming together, we've seen a shortened sales cycle on some of the products that we have.
Christopher John Allen: Historically had great success with <unk>.
Christopher John Allen: We've also seen a much more robust discussion on future strategic plans on the client base. So I think we're well positioned going into the rest of the year.
Christopher John Allen: To bring that.
Christopher John Allen: To bring that to bear.
Christopher John Allen: And then just follow that up this is Glenn on the macro side, we've seen a reengagement on the fixed income.
Glenn: Fund side of the business, but the amount of fixed income funds, having increased by about 7%.
Glenn: Versus the prior year, which.
Christopher John Allen: Again makes us incredibly well positioned given the suite of assets that we have both on the end of day pricing reference data the years of history, there plus on them more modern tools that we have rolled out to the market like <unk>, where we see continued strong adoption and continued.
Christopher John Allen: Strong demand and then obviously the fixed income index business that I referenced earlier in my comments.
Christopher John Allen: Our next question comes from Craig Siegenthaler with Bank of America.
Craig William Siegenthaler: Please go ahead.
Craig William Siegenthaler: Thanks, Good morning, everyone.
Craig William Siegenthaler: Our question is on the acceleration in <unk>.
Craig William Siegenthaler: <unk> in the fixed income business, we're curious which channels are driving upside to wins has there been any noticeable changes in attrition and how this translate into future revenue growth.
Worn: Hey, Craig it's worn so I think Chris and Lynn just cover kind of what we're seeing on the customer front and Thats, a big part of why Youre seeing that pick up an ASC in the fixed income and data and analytics business. So and so we've seen pretty stable retention trends, we're seeing an improvement in the sales cycle, we're seeing as I.
Worn: On our repaired remarks or more of a reengagement.
Craig William Siegenthaler: From the customer base within the fixed income ecosystem around those products, whether it's the pricing and reference data business or the index business and Thats something Thats really a big reason of why we're seeing the improvement there and it's really.
Craig William Siegenthaler: Spoke to you guys throughout the course of last year, we were having some pressures on that business. We mentioned that it was because we had a really sharp move higher interest rates. There was sort of a period of time, there where customers were sitting on their hands trying to sort of looking at their wounds. If you will in a way and now that we've seen somewhat of a stabilization here at these kinds of interest rates on fixed income.
Craig William Siegenthaler: <unk> becomes a really attractive asset class and I think thats a lot of the reason youre seeing that re engagement Youre seeing fund growth Youre seeing index purchases things of that nature of that is really starting to help that business pick up versus where it was a couple of quarters ago.
Craig William Siegenthaler: The next question comes from Kyle Voigt with <unk>. Please.
Kyle Kenneth Voigt: Please go ahead.
Craig William Siegenthaler: Okay.
Kyle Kenneth Voigt: Thanks for taking my question.
Kyle Kenneth Voigt: Maybe just on the exchange segment I think the recurring revenues there were flat I.
Kyle Kenneth Voigt: And I think only 1% growth in the data and connectivity side I guess are you still expecting low single digit growth in recurring fees for the full year in that segment and then if so is that dependent on the IPO environment opening up further or would you expect some acceleration in the data and connectivity line into the back half of the year that could still drive.
Kyle Kenneth Voigt: Full year growth into that low single digit range.
Kyle Kenneth Voigt: Steakhouse worn so yes, we still expect that to be in the low single digit range were really what could.
Kyle Voigt: What happened this quarter I mentioned, a little bit in my prepared remarks with more on the New York stock exchange.
Kyle Voigt: James data side.
Kyle Voigt: Were in the prior year, we had.
Kyle Voigt: The administrative KFC had kind of overbuild people on our allocation was a little bit higher than three to reverse some of that in the first quarter you will see revenue in the second quarter pick back up is that kind of is no longer the case.
Kyle Voigt: For us and so I think you'll start to see a little bit better growth as we kind of move through the balance of the year within that segment because the underlying trends. There is still the same as what we've been seeing the last couple of quarters.
Kyle Voigt: Certainly on the exchange data side things are positive.
Kyle Voigt: We're seeing some momentum in listings for sure but at the same time. There is M&A. There is still an element of the listings on the on the stack side, that's weighing a little bit so so to get to that low single digit I don't think you necessarily need to see.
Kyle Voigt: Acceleration in listings, but certainly we are seeing some positive things that I think are.
Kyle Voigt: No encouraging on that front and I think the trends on the exchange data side, particularly on the future side I think we will continue to be strong through the balance of the year.
Kyle Voigt: Okay.
Speaker Change: Great. Thank you.
Kyle Voigt: The next question comes from Brian Bedell with Deutsche Bank. Please go ahead.
Brian Bertram Bedell: Great. Thanks. Good morning, Thanks for taking my question, maybe just a two parter on mortgage for one and then just on the guidance.
Brian Bertram Bedell: For the segment, maybe just your view on the trend of recurring revenue throughout.
Brian Bertram Bedell: Throughout the year as we progress sequentially each quarter.
Brian Bertram Bedell: Just just generally the trend given.
Brian Bertram Bedell: The pullback in some of the renewals.
Brian Bertram Bedell: The Black Knight servicing headwinds contrast, it with and this links into probably been contracted with the really good progress youre, making on the new business wins and then if you could update us on the.
Brian Bertram Bedell: You were at $30 million of out of the 125 revenue synergy goal at the end of fourth quarter. If you could update that number on a run rate basis.
Speaker Change: It sounds like three questions Brian.
Brian Bertram Bedell: All right.
Brian Bertram Bedell: I'll take one and three been with Ben I'll take two.
Brian Bertram Bedell: So I think towards the higher <unk>.
Speaker Change: Towards the higher end of that of the total of the range for total revenue.
Speaker Change: We're talking about originations down more in the higher single digit mid to high single digit range versus 2023.
Speaker Change: Which was also by the way the worst year for originations in probably about 30 years, I think you'd expect recurring revenues to be down a little bit year over year, I mean renewals will come in.
Speaker Change: Little bit will be under a little bit of pressure continued to be under a little bit of pressure I would imagine decisions get pushed out a little bit of things of that nature towards the higher end.
Speaker Change: I think flat to maybe.
Speaker Change: Potentially a little bit softer versus last year's fair and really for the same reason, which is not really to the same magnitude.
Speaker Change: That you would see probably in the higher single digit range. If you will on that front. So.
Speaker Change: Look I think importantly, all through all of this and what's kind of driving some of this is just uncertainty across this asset class and certainly across a number of asset classes.
Speaker Change: And that uncertainty is helping to propel a lot of growth in other areas of our business.
Speaker Change: We've seen some better trends in both bonds between better trends in Cvs in April obviously, our futures business is doing really well and.
Speaker Change: And so it's.
Speaker Change: This morning, because as part of a bigger and broader business that has proven to continue to compound for a lot of different environments and I think that will continue to be the case. Despite what is kind of early.
Speaker Change: A generational low and industry origination volumes for the mortgage market at the moment.
Speaker Change: Quickly on on just on the on the revenue synergies.
Speaker Change: We continue to make progress there.
Speaker Change: Third we are around $30 million or so range last quarter.
Speaker Change: We continue to make progress on that front, we will give you guys more of an update as we kind of move closer.
Speaker Change: Closer to next year, though.
Speaker Change: Okay.
Speaker Change: And I'll I'll pick up on some of the comments that I made earlier around sales. So we.
Speaker Change: We continue to have great sales success, we're really happy.
Speaker Change: With the success that we're having.
Speaker Change: With our with our clients and the fact that even in this even in this environment.
Speaker Change: And I use the analogy with the tide the out we're so pleased to see that clients right now are making investments at this point in time.
Speaker Change: To be able to better position them when the tide comes in and when volumes start to return that they don't have to just throw bodies to the business in a very inefficient way that they can actually leverage technology and automation that we're providing to help them grow so were very pleased and what we're seeing there where actually you.
Speaker Change: It is also Brian as a as an opportunity to help our clients. So I'll give you. An example in our DNA business, we had some noise in our DNA line this past quarter.
Speaker Change: There we had some clients that were legacy clients of our data and document automation platform that we're not on encompass.
Speaker Change: They are struggling in terms of volumes and in this environment, we took it as an opportunity to restructure.
Speaker Change: Their agreement.
Speaker Change: In some cases get them onto and pump us.
Speaker Change: Coupled with DDA, so that they can get the full.
Speaker Change: <unk> that that combined solution provides by having the loans originated on encompass and then the automation capabilities to flow straight through because we have whetted that DDA platform directly into the encompass platform. So we're using it as an opportunity that even though we now have to implement that clients can take time to get them implemented from a.
Speaker Change: T J perspective, we're in a much better situation with that client to continue to grow with them and provide value.
Speaker Change: To that client going forward in that example is specifically citizens bank as they are now on encompass the DDA platform and they have MSP as a complete front to back solution set.
Speaker Change: For them, so we're using it as an opportunity for clients as well.
Speaker Change: Okay, that's great color. Thank you.
Speaker Change: The next question comes from Alex <unk> with Goldman Sachs. Please go ahead Alex.
Alex: Hi, Good morning, everyone. Thank you for the question I wanted to pivot a little bit maybe focus on the energy markets for a couple of minutes.
Alex: Specifically just zoning in on oil now volatility has been a little bit more conducive to the environment here, but it looks like the open interest has been growing really nicely north of 20% or so year over year. So a couple of questions here I guess, what is driving I guess the accelerated growth in oil for you guys across the board, it's not just <unk>, but it seems a little.
Speaker Change: Broader and then how do you think about the sort of the structural versus cyclical benefits in that market.
Speaker Change: Kind of a higher run rate growth from here and if so why and maybe you could just expand out sort of the sources of growth there. Thanks.
Speaker Change: Thanks, Alex it's been and.
Speaker Change: For us we see it as a long term growth trend for us to answer the tail end of that.
Speaker Change: That question that you asked there because in our view.
Speaker Change: The trends within energy broadly.
Speaker Change: As well as.
Speaker Change: Within oil specifically.
Speaker Change: Is are still that theres been underinvestment in legacy energy infrastructure.
Speaker Change: The markets are still electronic buying the market once the efficiency that that can be provided by the electronic vacation.
Speaker Change: Energy markets that are more global.
Speaker Change: Supply chains are continuing to evolve.
Speaker Change: Clients want more precision and their ability to manage risk at the points of production.
Speaker Change: And consumption.
Speaker Change: And the world's moving more grain.
Speaker Change: So you have that confluence of issues and we've been managing our portfolio across energy as a portfolio that helps to solve all of those problems. So we've built deep liquid products across our gas business hundreds of locations and benchmark products within.
Speaker Change: Our gas business, we've done the same exact thing within our oil business and we've done the same thing in our environmental business. So there is a relationship between all of those that we think is strong and you can't discount that is an underlying thing thats growing our overall complex because customers want to manage all of this risk in.
Speaker Change: In one place.
Speaker Change: So we.
Speaker Change: We continue to be very well positioned you have Brent is the cornerstone of this business I went through in my prepared remarks, and we talked about a lot of the innovation that we've introduced to this market over the last three years with our Bourbon contract growing significantly with our <unk> contract.
Speaker Change: Which now has Midland WTS oil basis, Houston up flowing into the Brent contracts, we are so well positioned.
Speaker Change: Across that complex to grow as our clients need the precision of these risk management tools.
Speaker Change: That it's fantastic for us and even in oil I would point out that we've been from an environmental perspective investing in new contracts like our <unk> contracts renewable identification numbers.
Speaker Change: As the EPA continues to raise the number of the amount of renewable fuels that needs to be blended into gasoline.
Speaker Change: And that used to be a very much an OTC opaque market and we've introduced futures into that and it's been growing very nicely for us as well. So we continue to innovate in this space not only with an oil, but I think it's important to look at it in the broader context of our energy business.
Speaker Change: We have no further questions. So I'll hand back to Jeff Sprecher CEO for closing remarks.
Speaker Change: Okay.
Jeffrey C. Sprecher: Well. Thank you Emily Thanks, all for joining us this morning, and I want to thank my colleagues again for a record first quarter and our customers for their continued business and trust and we look forward to updating.
Jeffrey C. Sprecher: You again as soon as we continue to try to innovate and build out this all weather business model have a good day.
Speaker Change: Thank you everyone joining us today. This concludes our call and you may now disconnect your lines.