Q4 2024 Intercontinental Exchange Inc Earnings Call
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Hello, everyone and welcome to the fourth quarter 2024 earnings Conference call and webcast. My name is Lydia Dolby you'll break it today.
After the prepared remarks, there'll be an opportunity to ask questions if you'd like to participate in the Q&A you can do slip a crushing style Philip I want you to think he bought we find the ask that you limit yourself to one question and return to the queue for any follow up.
Speaker Change: I'll now hand, you over to capture some bullish my job of Investor Relations to begin. Please go ahead.
Speaker Change: Good morning, I suppose fourth quarter 'twenty 'twenty four earnings release and presentation can be found in the investors section of <unk> com beside it will be archived and our goal will be available for replay today's call may contain forward looking statements. These statements, which we undertake no obligation to update represent our current judgment and are sub.
Speaker Change: Two risks assumptions and uncertainties brothers.
Speaker Change: Broad description of the risks that could cause our results to differ materially from those described in forward looking statements. Please refer to our 2024 Form 10-K and other filings with the SEC.
Speaker Change: 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, you'll find a reconciliation to the Google in 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.
Speaker Change: <unk> earnings per share.
Speaker Change: Throughout this presentation unless otherwise indicated references to revenue growth are on a constant currency basis.
Speaker Change: When you see that exploratory notes on the second page of the earnings supplement for additional details regarding the definition of certain items.
Speaker Change: With us on the call today are Jeff Sprecher Chair and CEO Warren Gardiner, Chief Financial Officer, Ben Jackson, President Lynn Martin President of NYSE, and Chris Edmonds President of fixed income and Ddos services I'll now turn the call over to Warren.
Speaker Change: Thanks, Scott good.
Speaker Change: Good morning, everyone and thank you for joining us today I'll begin on slide four with a summary of our record 2024 results.
Speaker Change: Full year adjusted earnings per share totaled $6 seven.
Speaker Change: An increase of 8% year over year, marking the best year in our company's history.
Speaker Change: For the full year net revenues totaled a record $9 $3 billion and pro forma for the acquisition of Black Knight increased by 6% versus last year.
Speaker Change: Full year adjusted operating expenses totaled $3.810 billion, an increase of roughly 1% year over year on a pro forma basis.
Speaker Change: It's worth noting that in just 16 months following the close of Black Knight, we've achieved run rate expense synergies of $175 million and now expect to reach our full synergy target of $200 million buy.
Speaker Change: By the end of 2025.
Speaker Change: In addition, we are also raising our black Knight expense synergy target to $230 million.
Speaker Change: This strong performance drove record full year adjusted operating income of $5 $5 billion, an increase of 10% year over year.
Speaker Change: Moving to cash generation. This record operating performance contributed to full year free cash flow of $3 6 billion of which we returned $1 billion to shareholders through dividends, while also reducing our leverage to under three three times EBITDA versus four three times upon the close of Black Knight in late 2020.
Speaker Change: Three.
Speaker Change: As a result of the significant progress we have made on leverage we now expect to begin repurchasing shares in the first quarter.
Speaker Change: Recall that we will we expect.
Recall that we still expect and are on track to achieve leverage levels of approximately three times EBITDA.
Speaker Change: We'll balance share repurchases with continued deleveraging until we reach this target, which we expect will occur later this year.
Speaker Change: Moving to slide five I'll discuss our fourth quarter performance.
Speaker Change: Fourth quarter adjusted earnings per share totaled $1 52 up 14% versus last year.
Speaker Change: Fourth quarter net revenues of $2 3 billion increased 5% year over year, driven by transaction revenues of $1 $1 billion in recurring revenues of $1 2 billion.
Speaker Change: Fourth quarter, adjusted operating expenses totaled $973 million.
Speaker Change: $4 million below the low end of our guidance range, driven by reduced marketing and legal spend as well as lower customer acquisition costs at the NYSE.
Speaker Change: Now, let's move to slide six where I'll provide an overview of the performance of our exchange segment.
Speaker Change: Fourth quarter net revenues totaled $1 2 billion up 9% year over year.
Speaker Change: Transaction revenues of $883 million were up 13% in part driven by record revenues across interest rates in our global energy business, which grew 38% and 16% year over year, respectively.
Speaker Change: Revenues within our global oil complex increased 11% year over year, while natural gas and environmental products, which represent nearly half of our energy revenues increased by 22% in the quarter and were up 31% for the full year.
Speaker Change: In addition, 2025 is off to a strong start with January volumes, increasing 21% year over year and total open interest up 11% year over year, including 13% growth in global energy and 17% growth in our interest rate business.
Speaker Change: Recurring revenues, which include our exchange data services, and our NYSE listings business totaled $353 million.
Speaker Change: The sequential decline in exchange data services was largely driven by a one time full year true up to our tape revenues at the NYSE, which we do not anticipate will repeat in 2025 as.
Speaker Change: As a result, we expect that exchange data and connectivity services revenues will rebound the $240 million to $245 million range in the first quarter.
Speaker Change: In our listings business well less than half of global Ipos met the standards to list on our exchange in 2024, the NYSE helped raised $17 billion in new proceeds welcome.
Speaker Change: Welcoming 53, new operating companies, including seven of the top 10, Ipos and nine of the top 10 best performing Ipos.
Speaker Change: Looking to 2025, we expect our recurring revenues in our exchange segment will grow in the low single digit range largely driven by continued growth in our futures data services.
Speaker Change: Turning now to slide seven I'll discuss our fixed income and data services segment.
Speaker Change: Fourth quarter revenues totaled $579 million, including transaction revenues of $108 million within ice bonds lower tax loss harvesting activity relative to 2023 within our muni business offset growth in institutional corporates, while strong Cds clearing activity was offset by lower levels of member interest following.
Speaker Change: Two fed cuts towards the end of 2024.
Speaker Change: Recurring revenues totaled a record $471 million and grew by 5% year over year.
Speaker Change: In our fixed income data and analytics business record fourth quarter revenues of $301 million increased by 5%.
Speaker Change: By growth in pricing and reference data and another quarter of double digit growth in our index business.
Speaker Change: Other data and network services revenues also increased by 5% in the fourth quarter driven by continued growth for both ice global network and our consolidated feeds offering as well as continued strength in our desktop solutions.
Looking into 2025 and supported by an ASC that exits the fourth quarter up 5% year over year, we anticipate mid single digit growth in our fixed income and data services recurring revenues.
Speaker Change: Please flip to slide eight where I'll discuss the results in our mortgage technology segment.
Speaker Change: Fourth quarter mortgage technology revenues totaled $508 million slightly above the high end of our guidance range.
Speaker Change: Recurring revenues totaled $391 million, while down on a year over year basis revenues improved relative to the third quarter driven by growth in both our servicing solutions and our data and analytics business.
Speaker Change: Similar to prior quarters, while the majority of encompass customers renewed at higher minimums. The improvement in recurring revenues was somewhat offset by customers that reduced minimums at renewal.
Speaker Change: Transaction revenues totaled $117 million up 12% on a year over year basis, but as anticipated were down slightly relative to the third quarter due to seasonality in the purchase market dynamic that typically impacts both the fourth and first quarter of each year.
Speaker Change: Worth, noting that according to my ice mortgage technology.
Speaker Change: We continue to see signs of market stabilization as housing inventory continues to rise up 20% in 2024 and annual home price appreciation has slowed to the lowest levels since 2011.
Speaker Change: Moving to guidance for 2025, we anticipate that total IMT revenues will grow in the low single digit to mid single digit range.
Speaker Change: The high end of the range is underpinned in part by low teens growth in industry origination volumes, which is similar to expectations set by the MBA Fannie Mae and Freddie Mac for the low end of the range assumes a more conservative origination backdrop that is flat with 2024 levels at both ends of the range, we anticipate growth in recurring revenues due in part.
Speaker Change: A portion of the 55 million in total revenue synergies, we have achieved beginning to come online.
Speaker Change: Please flip to slide nine where I'll provide some additional full year guidance.
Speaker Change: We expect 2025, adjusted operating expenses to be between $3 billion $915 million and $3 billion $965 million.
Speaker Change: An increase of roughly 3% year over year at the midpoint.
Speaker Change: Similar to prior years, we expect to invest in our people, our technology and growth initiatives across our business.
Speaker Change: These investments somewhat offset by synergies related to black Knight.
Speaker Change: Moving below the line similar to last year. We currently expect our full year tax rate will be in the range of 24% to 26%.
Speaker Change: And finally, we expect full year capex to be in the range of $730 million to $780 million.
Speaker Change: As is typical in the case in the years following an acquisition Capex is expected to be slightly elevated as we invest and reposition the acquired assets.
Speaker Change: In addition to these IMT related investments, we will also make revenue related investments in our data center footprint to meet growing customer demand for additional capacity.
Speaker Change: In summary, we delivered a very strong finish to another record year of revenues operating income and free cash flow and adjusted earnings per share we invested across our business, while also significantly reducing our leverage.
Speaker Change: As we kick off 2025, we're focused on once again delivering growth and creating shareholder value.
Speaker Change: I'm happy to take your questions during Q&A, but for now I'll hand, it over to Ben.
Ben Jackson: Thank you Lauren and thank you all for joining US. This morning, Please turn to slide 10.
Speaker Change: Across our futures markets, we've worked for over two decades to build out the scope and depth of our multi asset and multi geography offering to allow for both flexibility and precision trading from wherever in the world customers choose to trade on ice.
Speaker Change: As a result, a record of over 2 billion futures and options contracts traded on ice in 2024.
Speaker Change: Marking the highest volume year in Ice's history, including a record $1 2 billion commodity contracts and a record $753 million interest rate contracts.
Speaker Change: This strong performance contributed to the 12th consecutive year of record futures revenue in 2024, which grew 20%, including 15% in the fourth quarter.
Speaker Change: Across our energy markets, we saw the importance of investing in a diverse and globally interconnected energy platform that better serves the needs of an evolving and growing commercial customer base.
Speaker Change: By working closely with our customers, we have built and continue to enhance our leading global energy network that delivers comprehensive risk management solutions provides capital efficiencies and is positioned to grow alongside the continued evolution of global markets.
Speaker Change: All of this while providing the critical price transparency across the energy spectrum needed to navigate the energy transition and to meet forward looking demand.
Speaker Change: Over the last five years revenue growth across our energy markets has averaged 14% growth annually with 2024 revenues, reaching a record $1 9 billion up 25% year over year.
Speaker Change: This strong performance was driven by record energy volumes and is a testament to customers continued confidence in ice as the global energy hedging venue of choice.
Speaker Change: And our oil business, we offer a key benchmark contracts such as Brent.
Speaker Change: As the global benchmark for crude oil.
Speaker Change: <unk> prices roughly three quarters of the world's internationally traded crude and serves as the cornerstone of our global oil complex, which today includes over 800, locational and product spreads relied on by commercial customers.
Speaker Change: This innovation and evolution have enabled us to continue serving our global customers and to drive growth across the business delivering record oil revenues in 2024, which grew 21% year over year.
Speaker Change: This strong performance was underpinned by the highest volume year for total oil contracts traded on ice, including records across our Brent and gas oil benchmark contracts.
Speaker Change: In addition, as trade dynamics evolve and become increasingly complex customers not only are seeking liquidity and the major global benchmarks, but also in products that provide greater hedging precision.
Speaker Change: This dynamic is illustrated by record trading activity in our other crude and refined products in 2024 with volumes up 34% year over year, including records across our Platts, Dubai and Mervyn contracts.
Speaker Change: Our global oil offerings sits alongside our global natural gas markets, where the globalization of this commodity is underpinned by the rise of liquefied natural gas or LNG.
Speaker Change: Ongoing liberalization of the LNG market has put more natural gas in motion over longer distances with a greater number of touch points, along the value chain from production to consumption.
Speaker Change: At the same time demand for natural gas continues to grow and likely sustainably for the foreseeable future.
Speaker Change: Trends that support this are the undeniable secular growth and overall energy demand increased demand for data centers and the associated power that goes with it and the move to gas as a cleaner fossil fuel source versus coal.
Speaker Change: In essence, this evolution creates opportunities for new trading relationships to develop and adds an extra layer of complexity that fuels adoption to our global gas product suite.
Speaker Change: This was illustrated by record market participation and our global gas complex in 2024, which has increased nearly 30% since 2019.
Speaker Change: As supply chains evolve and globalize.
Speaker Change: The quality of our expansive range of benchmarks is evident.
Speaker Change: With our natural gas business delivering another year of record revenues in 2024, increasing 30% versus last year.
Speaker Change: This strong performance was led by record revenues in our title transfer facility benchmark or TTS, which we have positioned as the Brent of natural gas and plays a critical role in providing global natural gas price signals.
Speaker Change: As a result, Tcf continues to be relied upon by an increasing number of market participants with market participation and volumes, both setting new highs in 2024 and each growing double digits on average over the past five years.
Speaker Change: In Asia, where coal still accounts for nearly half of the region's energy supply, our Japan Korea marker Jkf as C market participation grow double digits on average over the past five years, reaching a record in 2024 and increasing 27% year over year.
Speaker Change: As a cleaner alternative to coal natural gas has accelerated the global risk management needs related to the commodity and caused the markets across North America, Europe, and Asia to become increasingly interconnected. This dynamic was once again highlighted by Jay km volume execution trends in the fourth quarter with two <unk>.
Speaker Change: <unk> of J km volume executed by the GKN TTS spread.
Speaker Change: In North America as market participants continue to gravitate towards <unk> Henry hub contracts for the liquidity ice offers in longer dated tenures along with the linkage to our exclusive regional basis market volumes in our complex grew 30% year over year, including record volumes across our basis markets, which spanned 70 hubs.
Across North America, allowing customers to manage regional supply and demand dynamics.
Speaker Change: Trading alongside our global oil gas and power markets are leading environmental markets, which for first launched nearly two decades ago provide customers price transparency across the energy spectrum that is critical in navigating the clean energy transition.
Speaker Change: Here, we've seen market participation grow double digits on average over the past five years, including record participation in 2024 up 13% versus prior year.
Speaker Change: At the same time record volumes across the complex were up 39% year over year led by another record setting year in our North American environmental markets.
Speaker Change: These record volumes represent the equivalent of over $1 trillion.
Speaker Change: In notional value for the fourth consecutive year and contributed to a 40% increase in environmental revenues in 2024 versus the prior year.
Speaker Change: In summary, the evolution of our energy markets is one example of how we continuously invest and develop customer driven solutions across asset classes to drive value creation are.
Speaker Change: Our record performance is a product of these investments some that we've made more than a decade ago.
Speaker Change: Turning now to our fixed income and data services business on slide 11, driven.
Speaker Change: Driven by multiyear investments in both technology and data are comprehensive fixed income data platform continues to deliver compounding revenue growth.
Speaker Change: Our position as a leading provider of price and reference data has served as the foundation for many innovative solutions such as our rapidly growing index franchise.
Speaker Change: We built through both organic and inorganic investments, including our acquisitions of IDC and the Bank of America Merrill Lynch Index platform.
Speaker Change: In 2024 revenues revenues in our index business increased double digits year over year, a key driver was growth in ETF assets under management Benchmarked to ice indices up 13% year over year.
Collectively the strong performance across our PRT and index business drove 5% growth in our fixed income data and analytics business in 2024.
In addition, we continue to see returns on past investments made to enhance content and functionality across our other data and network services business, which grew 5% in 2024 versus prior year as an example, within our consolidated fees business investments we've made to.
Speaker Change: And enhance our offerings, including commodity and energy data now available on our feeds has led to accelerating adoption by large financial institutions, including displacements of larger multi asset class incumbents.
Speaker Change: This was a key contributor to the high single digit revenue growth in this area in 2024.
Speaker Change: With content from over 600 data sources as firms seek more high quality data from a range of different sources in a cost effective manner and access to new unique content, our competitive and comprehensive offering stands to benefit.
Speaker Change: Yeah.
Speaker Change: Finally, as we move forward, we remain focused on continuing to leverage our deep expertise in gathering and cleansing unstructured data to develop actionable insights and add transparency not only to the fixed income markets, but across asset classes.
Speaker Change: For example in 2024, 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.
Speaker Change: This solution improves transparency and facilitates risk management throughout the housing finance and property insurance sector.
Speaker Change: Allowing customers to apply ice climate metrics to individual loans.
Speaker Change: Properties and entire portfolios improving the visibility to the inherent climate risks in each.
Speaker Change: We also went live with our MBS mortality indicator.
Speaker Change: Which leverages datasets across ice data services and ice mortgage technology to produce daily trading signals for more than 900000 agency and residential MBS pools.
Speaker Change: Shifting now to our mortgage business on slide 12.
Like our exchanges and fixed income businesses ice mortgage technologies products and network excel by offering a value proposition that enables efficiency gains for our customers.
Speaker Change: We target asset classes that are in the early stages of an analog to digital conversion because we believe these asset classes will benefit from greater automation and create strong network effects. This is no different in mortgage where we've constructed an unparalleled network that seamlessly connects key stake industry stakeholders within a single <unk>.
Speaker Change: End to end digital ecosystem.
Speaker Change: That kind of connectivity and network is a hallmark of the ice business model and one that combined with our leading solutions gives us confidence that we can grow a business that at $2 billion. Today is only a fraction of the $14 billion addressable market. That's in the early days of an analog to digital conversion.
Speaker Change: In 2024, we continued to make progress on the successful integration of Black Knight and executing on our strategy of relieving the pain points and inefficiencies across the mortgage workflow.
Speaker Change: Starting with encompass we closed on 38 client wins in the fourth quarter as customers focus on modernizing their infrastructure and workflow efficiencies and to kick off the year. We're pleased to announce that flagstar and Howard Hanna has signed on as encompass clients.
Speaker Change: In parallel we delivered on several enhancements to encompass during last year, including the launch of multichannel support for web based loan manufacturing and are pleased to see clients are adopting this innovation.
Speaker Change: We also unified our industry, leading marketing and sales automation solutions into one complete customer acquisition and retention suite.
Speaker Change: We also added a borrower facing mobile application to support lenders on our platform.
Speaker Change: Then we embedded these into encompass workflows directly enabling our lender clients to efficiently identify customers to target with the right products at the right time and manage their leads through to closing.
Speaker Change: This helped to drive over 200 cross sells of our customer acquisition suite into encompass customers in 2024.
Speaker Change: Along the same lines, we integrated datasets from Black Knight into encompass including property tax flood and closing fees, providing customers with more choice of service providers on our platform.
Speaker Change: And are pleased by the early traction across these offerings executing on over 400 data cross sells to encompass clients in 2024.
Speaker Change: Along the same lines and consistent with our approach of investing ahead of secular growth throughout 2024, we dramatically enhanced our ice product and pricing engine or PPE.
Speaker Change: And look forward to showcasing this enhanced offering at our upcoming ice experience event, an annual gathering of thousands of customers, where each year, we launch our new and enhanced innovations for our clients.
Speaker Change: For MSP, roughly 80% of new client wins during the year were cross sells to encompass clients.
Speaker Change: We also continued to make significant strides in enhancing functionality designed to elevate customer interactions and experiences, including the rollout of our MSP digital experience or MSP Dx.
Speaker Change: At the same time, we enhanced and integrated our loss mitigation customer service and collections capabilities. These embedded tools within MSP not only streamline operations, but help clients prepare for the eventual increase in defaults and foreclosures.
Speaker Change: Our customer service enhancements improve the customer experience and as an example, our call prediction functionality uses artificial intelligence to analyze the account and provide a prediction of why the customers, calling allowing the customer service agent to reach a resolution and decreased timeframe and reduce friction to the homeowner.
Speaker Change: Lastly, our actionable intelligence platform or AIP, which is in the process of being bringing rebranded as ice business intelligence provides robust analytical and reporting capabilities based on Configurable suites for originators and Servicers originators will be able to view dashboards to manage all aspects of production, including marketing.
Speaker Change: <unk> sales pipelines and closing through all channels, including retail wholesale and correspondent.
Speaker Change: Servicers will have sophisticated risk management compliance and capacity planning tools that will help them better manage portfolios and coordinate activities across the enterprise.
Speaker Change: By delivering timely and actionable insights our business intelligence platform will help enable financial institutions to stay agile and competitive and a continually evolving market all while seamlessly integrating with existing systems for ease of adoption.
Speaker Change: In that regard we are pleased to announce that we signed a top five depository under this service in 2024, and we continue to see other clients engage in this solution suite based on the efficiencies and revenue opportunities. It can help uncover.
Speaker Change: In summary, we are pleased to see the value of our comprehensive platform is resonating in the marketplace.
Speaker Change: We remain optimistic about the long term opportunity to accelerate the analog to digital conversion.
Speaker Change: With that I'll hand, it over to Jeff. Thank.
Jeff Sprecher: Thank you Ben and thank you all for joining US this morning. Please.
Speaker Change: Please turn to slide 13.
Speaker Change: Over two decades ago, we launched Intercontinental exchange a name we chose to reflect our vision of better serving global markets with a mission to drive transparency and create workflow efficiencies for our customers.
Speaker Change: The pursuit and execution of this vision first led us to energy markets, where at the time of our 2005 IPO on the New York Stock Exchange, we were purely an energy exchange offering only a handful of products and on track to generate what would ultimately be $156 million in total.
Speaker Change: <unk>.
Our goal then is it remains today was to build a platform that operated on a global scale and which had the asset class breath to enable us to quickly and efficiently chase growth opportunities as they emerge around the world and.
Speaker Change: In the year since our focus on leading technology customer driven product innovation and operating efficiency has remain core to our strategy.
Speaker Change: We've built new technology from scratch acquired old technology, and refurbished it and innovated all along the way developing countless new products and content that seamlessly flow through our global distribution platform, enabling us to build on the success of our core businesses, while looking ahead to new opportunities.
Speaker Change: In many ways. This is how we built what I often refer to as our all weather business model, one that drives growth on top of growth through an array of economic political and regulatory environments with 2024, marking our 19th consecutive year of record revenues, increasing 16% year over year.
Speaker Change: Year to $9 billion.
Speaker Change: Through deliberate organic and inorganic investments that we've made some more than a decade ago and others in more recent years, such as our Midland HEU contract.
Speaker Change: Our leading global energy network today spans more than 2000 contracts.
Speaker Change: It's a business that as you've just heard continues to flourish more than 20 years later with revenues tripling since 2010 to a record $1 $9 billion in 2024, an increase of 25% year over year on top of 28% prior annual growth.
Speaker Change: Building on our energy business as the foundation, we've targeted an interrelated collection of markets to create a global risk management powerhouse that helps our customers manage risks associated to both acts of nature, such as issues that affect commodity supply chain flows and acts of man such as Central Bank and <unk>.
Speaker Change: Ross border trade policies.
Speaker Change: In 2013 through the acquisition of the London International Financial Futures exchange known as life and subsequently combining it with our own local commodity exchange and clearinghouse, we broadened our offering to manage the risk resulting from both types of forces.
Speaker Change: And in 2020 for our commodity markets as well as our interest rate derivatives complex all traded at record levels highlighting the key role that these contracts continue to play for global market participants.
Speaker Change: Across our interest rate contract portfolio diverging rate paths by central banks was a consistent theme throughout 2024 contributing to record revenues, which increased 30% versus 2023, including 38% growth in the fourth quarter. These.
Speaker Change: These results highlight the strength of our multi currency European UK and Swiss interest rate markets, including the key benchmarks Euribor Sonya Sara and gilts.
Speaker Change: In 2015, our acquisition of IDC proved to be instrumental and laid the foundation for our move into fixed income markets and the development of a comprehensive platform that has since evolved into nearly 500 unique institutional grade data products. One that continues to deliver compounding revenue growth as these markets on.
Speaker Change: And as passive investing grows.
Speaker Change: In our index business ETF AUM benchmark to our indices has grown to $648 billion at the end of 2024 from less than $100 billion in 2017, a key driver of the double digit average annual revenue growth over that timeframe.
Speaker Change: Fixed income and its related data is an area, where we continue to make strategic decisions to position ourselves for success for.
Speaker Change: For example in 2024, we announced our intention to launch a clearing service for all U S Treasury securities and repurchase agreements leveraging our infrastructure and expertise in centralized clearing.
Speaker Change: And in early January we announced our acquisition of the American financial exchange or FX, and electronic exchange for direct lending and borrowing for American banks and financial institutions.
Speaker Change: <unk> is focused on regional midsized and community bank customers covering many of the same customers that we serve through our mortgage technology network.
Speaker Change: <unk> is a natural fit at ice and complementing both our mortgage network and ices growing index business.
Ben Jackson: Across our mortgage business much like our strategy in other asset classes, we're leveraging our data technology and collective expertise to bring efficiencies to the entire mortgage manufacturing workflow and as Ben pointed out we continue to make strides executing against this strategy digitizing the workflow from homebuyer identification.
Speaker Change: <unk> all the way through to the capital markets in.
Speaker Change: In 2024, we added many new clients to the mortgage network, while also deepening relationships with our long standing customers.
Speaker Change: As we look to 2025 and beyond the New U S administration has pledged to increase U S energy production, which could change the supply chain dynamics of the world's energy supply.
Speaker Change: Resulting lee the global risk that will need to be managed we believe that energy demand growth, particularly in Asia. The power deregulation trends in Japan increases in U S energy exports in the multi decade, non linear energy transition all point to the growing use of market base commodity pricing.
Speaker Change: And risk management tools.
Speaker Change: And with new governments in the UK and EU Commission as well as in the U S. We expect novel policy decisions that will impact inflation and employment, which could drive continued demand for interest rate risk management in 2025.
Speaker Change: Also when thinking about the current robust AI investment environment, particularly in the U S. Coupled with uncertain Central bank interest rate policies and the potential demands for energy by this sector. These trends could further the need for commodity risk management, while continuing to stimulate trading and equity markets.
Speaker Change: From helping our customers navigate the long tail evolution of commodity markets to the digitization of fixed income workflows and automating mortgage placement.
Speaker Change: Our operating expertise, leading technology infrastructure and forward thinking that underpin the quality of the network that we operate proving.
Speaker Change: Proving to be our competitive advantage and providing the opportunity to unlock additional growth by collaborating across customers and our own business units.
Speaker Change: We believe that we're better positioned than ever to capitalize on the secular and cyclical trends across asset classes and we remain focused on investing and executing on the many growth opportunities that are in front of us.
Speaker Change: In summary for more than 20 years Ics continually evolve to meet the needs of our customers and provide value for our stockholders and that vein 2024 marked our 19th consecutive year of record revenues record operating income and record adjusted earnings per share.
Speaker Change: This consistent record of growth reflects on the quality of our strategy to diversify the business and position the company at the center of some of the largest industries undergoing analog to digital conversions a strategy that has created an all weather business model that is well positioned to continue to drive growth as it has for every year since we've.
Speaker Change: Been a public company.
Speaker Change: I'd like to thank our customers for their business and their trust in 2024, and I want to thank my colleagues for the efforts that contributed to yet another record year at ice.
Speaker Change: I'll turn our call back to our moderator linear and will conduct a question and answer session until 930 am eastern time.
Speaker Change: Yes.
Speaker Change: Thank you again, please press star followed by the number one if you'd like to ask a question. As you reminder, please limit yourself to one question only and then return to the queue.
Speaker Change: Our first question today comes from Ken Worthington with Jpmorgan. Please go ahead. Your line is open.
Ken Worthington: Hi, good morning, Thanks for taking the question when we look at the new client wins in mortgage both on the origination and servicing side, there would seem to be a lot of new business getting up and running all at the same time.
Speaker Change: After a period of limbo between Black Knight was announced and closed.
Speaker Change: Can you give us a sense of the cadence of the big new customer wins going live for MSP and encompass are.
Speaker Change: Are they front end loaded back end loaded as we think about this year and how does the new customer wins sort of contribute to that.
Speaker Change: The guidance that you gave us for 2025.
Speaker Change: Hey, Ken this is.
Speaker Change: This is Ben I'll start and Warren will probably take the last part of that question.
Speaker Change: So recall, we closed on black Knight, roughly 18 months ago.
Speaker Change: And since then.
Speaker Change: We have closed as you highlighted a number of very significant.
Speaker Change: Large large financial institutions onto both encompass and onto onto MSP.
We've also highlighted that it takes anywhere from 12 to 18 months for those clients to come online.
Speaker Change: Get through all their testing this is all absolutely critical infrastructure as you well know.
Speaker Change: And then once they start to come online they will roll it out division by Division. So it takes time to make these changes happen.
Speaker Change: Because the deal closed about 18 months ago, we're right now in that window, where in 2025, we are going to have a number of clients.
Speaker Change: That we closed in those in those windows coming live as this year plays out.
Speaker Change: Yes, I think youre going to see it.
Speaker Change: Coming in and building as that as the year plays out.
Yeah, Ken I would just add to that too thats right and we will start to see those are that's what we've talked to you guys about it throughout the years, we'd start to see these impact 2025 and in part of the reason we saw some stabilization towards the fourth quarter and recurring revenues because some of these are starting to come online too and so I think we're at a point, where we can start to grow from here I think one thing just to call out too is that right.
Speaker Change: All of that's good and we have that coming online there are still a little bit of some headwinds.
Speaker Change: There is the flagstar attrition that should happen towards the end of the year, that's probably a half a point in terms of an impact on our growth rate and then we also still expect some some headwinds from renewals on encompasses particularly related to 2020 in 2021 vintage that you've heard us talk about throughout last year got a little bit more of that to go.
Speaker Change: It's probably from a growth rate percentage, probably a low single digit impact for us but.
Speaker Change: An improvement from what we what we saw last year. So so there is some moving parts in there, but absolutely as Ben said, we're starting to see some of the impact from those wins come online and that will help us this year and then into next year as well.
Speaker Change: Thank you. Our next question comes from Alex <unk> with Goldman Sachs. Please go ahead.
Speaker Change: Hey, good morning, everybody. Thank you for your question as well I was hoping you could spend a couple of minutes on trends you're seeing in <unk> markets within your oil complex.
Speaker Change: Ice made a nice progress gaining market share over the course of last year. It looks like trends have picked back up again on the market share trend versus your primary competitor there. So.
Speaker Change: What's driving that how durable that is how do you expect that marketplace in that ecosystem to evolve as you progressed through 'twenty five 'twenty six.
Speaker Change: Okay.
Speaker Change: Alright.
Speaker Change: Hi, Alex Spence I'll take I'll take this one.
Speaker Change: We're pleased with the with the overall growth of our <unk>.
Speaker Change: Tire oil complex, it's done very very well.
Speaker Change: Over the last several years now and a lot of what.
Speaker Change: I think has fed into what's made <unk> successful.
Speaker Change: Is innovations that we launched a few years back so one innovation in particular was our Midland Wty HEU contract.
That we've talked about and highlighted that that contract.
Speaker Change: Is literally up 200%.
Speaker Change: On a year over year basis to start this year and had a phenomenal year last year as well.
Speaker Change: Another interesting data point on that Midland Wty HEU contract is that it is a truly physically delivered.
Speaker Change: Contract that supported by a lot of the big Big oil companies.
Speaker Change: And the amount of physical deliveries that we saw on our contract are double what our peer saw on WTS.
Speaker Change: So.
Speaker Change: It's a testament to the fact that the physical underpinning and structural pieces of this market are very strong.
And this is pricing.
Speaker Change: Midland WTS oil basis Houston.
Speaker Change: Now also flowing into the into the Brent contract.
Speaker Change: And and also flowing into into Europe as well.
Speaker Change: So given all those dynamics a lot of traders when they are trading well they'll trade as you know they'll trade base.
Speaker Change: Basis.
Speaker Change: Amongst other other contracts and the fact that we have branch we have the <unk> contract and we have our own <unk> contract clients that want to trade. This for maximum efficiency can trade all of those as a package or a subset of those package and we think that's what's feeding into a lot of the growth in our.
Speaker Change: In our <unk> contract.
Patrick: Our next question comes from Patrick <unk> with Piper Sandler. Please go ahead.
Patrick: Yes. Good morning, Thanks for taking the question. So I just wanted to follow up on the mortgage guide.
Speaker Change: The low to mid single.
Speaker Change: Revenue growth this year more than you said that I think the high end of that would imply low teens pickup in origination activity and Thats in line with what the industry forecasts are currently projecting I think.
Speaker Change: That growth number is projecting around 30% growth in refi activity. So could you talk about how you're thinking about the dynamic between refi versus purchase activity next year.
Speaker Change: Just kind of through the lines of that mortgage guide you provided thanks.
Speaker Change: Alright, Thanks, Patrick So look I think that that based on where rates are today that certainly you see that kind of refi growth might be a little optimistic, but we did want to incorporate that that view into our guidance and that's why we do also gives you a more conservative.
Speaker Change: Low end of the range in terms of what things could look like it's obviously difficult to predict, particularly the refi market and what you might see on an interest rate perspective, and the impact there. So.
Speaker Change: Look I think we're seeing some improvement on the purchase side in terms of the fundamentals I noted that in my script script in terms of some inventory.
Speaker Change: More inventory coming onto the market and price depreciation flowing and things of that nature.
Speaker Change: Have to sort of see how refis trend and that was you know largely depend on how the trajectory of interest rates. So tried to give you a kind of a wide band in terms of what what the year could look like from an origination.
Speaker Change: Perspective, but even within both ends of those.
Speaker Change: Dan I think we've got some some good growth that's coming through and importantly, the recurring revenues will start to grow too as well so.
Speaker Change: Hard to know exactly how that's all going to play out, but I think through that we've got an opportunity here to continue to invest in the business advance the industry and really put our platform on a better footing as we move throughout the year.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Bangladesh with Barclays. Please go ahead.
Okay.
Speaker Change: Hi, good morning, Thanks for taking the question.
Speaker Change: I was wondering if you could give a little bit more color on the timing of some of the expense synergies.
Speaker Change: Curious if you could kind of quantify what is the sort of your.
Speaker Change: Thinking about the pacing of the expense synergies you're realizing this year, what is sort of the year over year benefit embedded in your full year Opex guidance and given the increased expectation for now I think $230 million, how should we think about that as being layered in over the course of 'twenty six or sort of achieve towards the beginning of 'twenty six we see a bigger year over year benefit.
Speaker Change: Just curious if you could help us with the sort of pacing.
Speaker Change: Of those savings.
Speaker Change: Sure. So I think as Youre thinking about the impact for this year, obviously, we had a big year well really in 2023, so you've got to go back a little bit and so a lot of the synergies because we were very quick to close the deal to get these groups together and bring these groups together, we were able to realize a lot of the synergies in the third and the fourth quarter of 2023, and then of course a little bit.
More in 2024 as well part of what Youre also seeing as you kind of move throughout the year sequentially is that we're starting to invest in the business. Once we've gotten those those organizations in the right spot and so there's a lot of that is in the run rate. If you will already in terms of the synergies that we've that we've spoken to and so I think as you think about next.
Speaker Change: There is a little bit of help there.
Speaker Change: On a run rate basis, we've guided to about $25 million.
Speaker Change: Yeah.
Speaker Change: Some of that is going to come towards the end of this year. So it won't be necessarily fully run rate impact how the full run rate impact this year.
Speaker Change: And so as you're thinking about that it will be a help it's why you're seeing our expense guidance overall kind of more towards the lower end of what.
Speaker Change: It would be organic constant currency.
Speaker Change: Guidance in the past has been excluding synergies at a 3% so it's helping us a little bit there in terms of.
Speaker Change: The go forward in the 230 of the extra 30 that we've added.
Speaker Change: A lot of that is going to come in later years. That's a lot of that is related to systems and infrastructure and real estate and things of that nature, but it just takes time to to physician and get those cost savings out so no change to the timeframe necessarily in terms of reaching by 2028, but certainly an increase of course in the total amount we can achieve.
Speaker Change: We'll go next to Dan Fannon with Jefferies. Please go ahead.
Dan Fannon: Thanks, Good morning.
Speaker Change: To follow up on the fixed income data outlook mid single digit growth again can you talk to kind of the inputs there, whether it's pricing and new customer growth new products. We can see the asps. Some good dynamics I guess ending this year, but can you talk about maybe any changes in demand trends or the outlook. That's shifting as we think about 25 versus last year.
Chris Edmonds: Hi, This is Chris and thanks, Thanks for the question.
Chris Edmonds: What I would say right now you're seeing a trend within the space of clients, probably more buy side than anything related where they are very focused on the number of vendors that they are doing business with and looking for the most robust catalog of services available.
Chris Edmonds: They can.
Limit the amount of investment needed in order to consume the data they need to run the business and there is also a massive focus on predictability of cost something we hear each and everyday when engaging with our clients on that side. So given our robust catalog given the fact, we're connected in most of these people that is generating opportunities that we're seeing and probably as a headwind if you will.
Speaker Change: We're a small <unk>.
Speaker Change: Smaller data provider that has maybe one or two of the segments that someone is looking for versus a much wider piece of that so that gives us opportunity and looking forward I'll turn that over to warn you can talk about that piece of it.
Speaker Change: Yeah, Dan So I think look the guidance, we gave is pretty consistent with the last several years in terms of what we expected I think if you look at the ASP as we exit.
Speaker Change: The fourth quarter of five 4% certainly sets up for another good year and I think we'll have a solid year from both business lines within that recurring revenue.
Speaker Change: Within the recurring revenues.
Speaker Change: That we have and I think particularly one thing that we don't always talk about a whole lot of the other data and network services business, it's been around 5%. The last few quarters I think.
Speaker Change: Certainly can set up for a little bit of pick up as we move through throughout the course of next year in part because of some of the investments you've heard us talking about on the on the datacenter side, So very happy with where we're that businesses ended this year.
Speaker Change: Set up for next year, both on the other data and network services side, and the fixed income and data analytics side as well. So so again another thing solid year that coming.
Speaker Change: Coming in 2025.
Speaker Change: Our next question comes from Chris Allen with Citi. Your line is open.
Chris Allen: Yes, good morning, everyone and thanks for taking the question I wanted to maybe follow up on the energy markets I'm kind of curious how are you.
Speaker Change: The new administration policies may impact.
Speaker Change: <unk> months from your perspective, any new potential opportunities for your business moving forward.
Speaker Change: Or maybe potential headwinds and then any new any color just on you mentioned the opportunities to be.
Speaker Change: Trading relationships, maybe in terms of what type of customer.
Speaker Change: Sure.
Jeff Sprecher: This is Jeff.
Jeff Sprecher: A couple of things first of all we've talked a lot on this call already about R.
Speaker Change: Our Houston.
Speaker Change: Wty contract, which is really an export contract.
And we're hearing the administration's say they want to amplify U S production, which.
Speaker Change: We think will affect the export markets and play well into risk management using that contract.
Speaker Change: The other thing that.
Speaker Change: Beginning to hear a lot about from the administration is how sanctions might be used.
Speaker Change: And.
Speaker Change: And tear ups on other countries and <unk>.
Speaker Change: Again, we that that may affect the global supply chain for energy one of the takeaways from.
Speaker Change: From the European <unk>.
Speaker Change: Energy markets over the last few years was how quickly the energy markets are able to reorganize the supply chains and.
Speaker Change: And then we've been investing in the middle East in our Mervyn contracting in our Abu Dhabi exchange, which we think.
Speaker Change: The risk management dynamics around the changing supply chains.
Speaker Change: Can can have a positive effect for that contract as well.
Speaker Change: Okay.
Speaker Change: Our next question comes from Kyle Voigt with <unk>. Please.
Speaker Change: Please go ahead.
Speaker Change: Actually maybe I could just follow up on.
On the prior question and continue discussions specifically on Dutch TTS, you've seen significant growth in tcf over the past few years <unk> doubled in the past two years alone as you. Just noted there was some some of this has been driven by changes in supply chains Post Russia Ukraine.
Speaker Change: As well as growth of U S LNG into Europe.
Speaker Change: Have been some recent press headlines around the EU contemplating restarting, Russia gas imports. If there is a resolution to the war.
Speaker Change: Just wondering if you could speak to how that would potentially impact Dutch TTS and whether it changes anything with respect to the importance or utilization of that benchmark.
Speaker Change: Yeah.
Speaker Change: Thanks, Kyle it's bad.
Speaker Change: We've built our business.
Speaker Change: And all of the commodities that we cover as global businesses and that's how we've differentiated ourselves with hundreds if not thousands of contracts around the world to help customers manage their risks at the point of production and consumption and part of the reason that we did this alongside of partnering with our customers is that supply chain is due.
Speaker Change: Evolve and they do change.
Speaker Change: And right now we're in a situation where the Ukraine has has.
Speaker Change: Ceased all Russian gas going through.
Speaker Change: The Ukraine into into Continental Europe.
Speaker Change: Could that change, yes, it could but.
Speaker Change: For us when we look at the open interest trends in our contracts and look at the open interest trends in TTS.
Speaker Change: Incredibly healthy business credibly healthy contract for us and if you step back to when the Ukraine War started.
Speaker Change: Our open interest in that contract held in trading volumes.
Speaker Change: Went depressed for a little bit until it was until the market kind of reset and supply chain reset and then because we believe because the open interest.
Speaker Change: Held strong and continued to grow even during that window that once the supply chain reset the market knew how to price and to think about supply and demand dynamics that the contract has seen explosive growth. So we view it as.
Speaker Change: As a positive as these as the supply chains evolve and change.
Speaker Change: Geopolitical issues.
Speaker Change: And one other point that Jeff one other point that Ben alluded to in his prepared remarks was that.
Speaker Change: Increasingly now we are seeing these.
Speaker Change: Global natural gas contracts trade as payers.
Speaker Change: Basis trades between geographies.
Ben Jackson: And with TTS, becoming a real benchmark as Ben mentioned.
Speaker Change: And so.
Ben Jackson: As the supply chain.
Ben Jackson: Trades away potentially and moves around the world.
Ben Jackson: We would expect that those payer relationships would continue to do robust volume.
Ben Jackson: It's partly how the market has been managing the supply chain differences.
Ben Jackson: The next question comes from Alex Kramm with UBS.
Speaker Change: Please go ahead.
Speaker Change: Yeah, Hey, good morning, everyone, maybe just a quick one here you.
Speaker Change: Talked about the FX acquisition little bit in passing and I know, it's small, but maybe you can just give us a little bit more color on what you expect to do with that asset.
Speaker Change: I mean, you know you talked about semi.
Speaker Change: The amount of clients as the mortgage obviously its interest rates. So maybe you talk about your U S interest rate ambitions more broadly because you've talked about this over time, but you are not very big they are and then maybe for Warren is actually revenue contribution and where will that show up. Thank you.
Chris: Hey, Alex it's Chris.
Speaker Change: So.
Speaker Change: Consistent with what we've done with other asset classes and other offerings around the history device, it's making sure that we can find things to tuck in that.
Speaker Change: Where customers need and you look at the overlap of that customer base and how that product's being used we do think there are opportunities there for us to expand the use of those services all the time.
Speaker Change: But more transparency for those current users and those within the mortgage space as a whole that may wish to use it in the future certainly it's another product that we have in and.
Speaker Change: And the inventory for folks to use where they do not have to leave our ecosystem in order to go out and.
Speaker Change: Manage the risks they may be facing or manage the book that they have there. So it's still early days and putting that.
Speaker Change: And to the end of the process, but we look forward to growing that like we have many other products throughout the history of the company as they fit hand in glove with other pieces that we have.
Speaker Change: And Alex it's Lauren so.
Speaker Change: Immaterial amount of total revenue today.
Speaker Change: And so it's a small amount so I don't know that youll see much of an impact it will be in the fixed income and data services segment and the exchange component of that would be on ice bond side and then the index component will be more on the will of course be an index business, which is in fixed income data and analytics business line.
Speaker Change: The next question comes from Ashish <unk> with RBC. Please go ahead.
ashish: Thanks for taking my question. Another question on the mortgage business. However, the contract minimums on happening for <unk> compared to the mortgage origination levels in 2020 core alright.
ashish: Obviously, it would be how much do transaction volume have to improve on.
ashish: Benefits of the quite spanning from the mortgage company.
ashish: So it's more so.
ashish: I think the way to think about this oil well, let me back right.
ashish: Right now as we kind of move through this year, we still have the I would say the vast minority of customers.
ashish: Or sort of loans from our customers that R. R.
ashish: Above the minimums. So there is still a relatively small amount that are trending above the minimum but over the last several quarters, that's been improving and actually the last few quarters have been some of the best quarters in terms of a percent above the minimum maam that we've seen in a number of years. So we're heading in the right direction on that front and Thats in part because the market has gotten a little bit better but then.
ashish: And also as you've heard US notice note on calls that the minimums have been coming down for a number of the customers as they renewed so that's been sort of a dual impact that's helping on that front I think I'd point you back in terms of how to think about the impact I'd point you back to some comments that we've made.
ashish: A few quarters ago, which is if we are in a 7 million to $10 million loan environment at an industry level.
ashish: We would expect revenues to be.
ashish: A couple of hundred million to true up to close to around <unk> 5 billion in terms of incremental revenue in those two scenarios and so now as we move into a more normal market and for what it's worth $10 million loans has kind of been the average over the last 30 years.
ashish: <unk> been around 8 million loan so as.
ashish: As we move back.
ashish: Towards the more normal market youre going to certainly start to see that impact flow through a little bit more on the transaction side as that impacts those contracts.
ashish: The next question comes from Bill Katz with TD Cowen your.
Speaker Change: Your line is open.
Robin: Good morning. This is robin holding on for Bill Katz and thank you for taking the question.
Robin: Wanted to get your comments on interest rate volumes in open interest is there anything structural that youre doing or have done to drive robust volume and open interest growth here and where do you see the opportunities or potential headwinds for the rates business in 2025. Thank you.
Robin: Alright.
Ben Jackson: Excuse me Hi, it's Ben.
Speaker Change: We are very pleased with the growth that we've seen in our in our interest rate complex over the last couple of years and even starting into this year.
They are off to a fantastic start so we obviously have a multi currency.
Speaker Change: Interest rate complex that we built up we continue to invest in options in the development of options markets around.
Speaker Change: All of our interest rate futures, which has also helped in the development of those contracts.
Speaker Change: And we continue.
Speaker Change: <unk> continued to invest in and making sure that we're getting.
Speaker Change: The best market participants into these into these markets to create tight liquid markets for our clients. So those are some of the things that that we've done.
Think that.
Jeff Sprecher: As it relates to persistent interest rate volatility that's going on around the world. Obviously, we've added a bunch of administration changes around the world Jeff.
Speaker Change: I alluded to in his comments in his prepared remarks around <unk>.
Speaker Change: <unk> and the impact that has so if the administration changes happening settling and we will see what that means in terms of central bank policy and trade policies as they develop all of which we think should see volatility into the interest rate markets globally, and we are well positioned for it.
Jeff Becker: Thank you time for further questions. So I'll pass you back to Jeff Becker.
Jeff Becker: For closing comments.
Speaker Change: Well, thank you Lydia for moderating the call and thank you all for joining us this morning.
Speaker Change: We will look forward to updating you again very soon and we're going to continue to innovate for our customers and <unk>.
Speaker Change: Continue to drive this all weather business model that.
Speaker Change: We've been building.
Speaker Change: With that I hope, you'll have a great day.
Speaker Change: This concludes today's call. Thank you very much for joining you may now disconnect your lines.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yes.