Global markets operator IntercontinentalExchange Inc. (ICE) on Thursday reported an increase in profit for the second quarter from last year on higher revenues that helped offset costs related to the integration of NYSE and other items. Adjusted earnings per share for the quarter beat analysts' estimates.
ICE also said it has acquired certain trading technology patents that relate to computerized trading strategies.
Atlanta, Georgia-based ICE completed its multi-billion-dollar acquisition of NYSE Euronext during the fourth quarter of 2013.
Jeffrey Sprecher, chairman and CEO said, "In addition to raising capital through the sale of non-core businesses, we transitioned Liffe US to ICE Futures and continued to make solid progress on our strategic initiatives. NYSE grew its leading roster of listed companies and ICE launched new interest rate and energy products to meet global demand for risk management services and provide regulatory compliant solutions."
For the second quarter, net income attributable to ICE was $226 million, up from $154 million in the same period last year. However, earnings per share declined to $1.95 from $2.09 in the prior-year quarter on higher number of weighted average common shares outstanding in the latest quarter.
The latest quarter's results include NYSE integration costs of $36 million and the related tax impact, as well as certain tax impacts associated with the initial public offering or IPO of Euronext N.V., the pan-European exchange group.
Euronext's financial results are now included in discontinued operations. Discontinued operations also includes the NYSE technologies businesses that have been and are being divested.
Excluding these items, adjusted net income from continuing operations for the latest quarter were $2.10 per share, compared to $2.19 per share in the year-ago period.
On average, 16 analysts polled by Thomson Reuters expected the company to report earnings of $2.02 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenue for the quarter almost tripled to $1.01 billion from $372 million in the year-ago period. Revenue, less transaction-based expenses, more than doubled to $750 million from $372 million in the prior year. This includes net transaction and clearing revenues, less transaction-based expenses, of $460 million.
Analysts' revenue consensus was $777.01 million for the quarter.
Market data fees for the quarter more than doubled from the year-ago period to $96 million. Transaction and clearing revenues also more than doubled to $721 million.
Consolidated other revenues, which include technology services revenues, trading license fees, regulatory fees and listed company service fees, surged almost nine-fold from last year to $111 million.
ICE said it has identified an additional $50 million of cost synergies, increasing its total expense synergies from the NYSE acquisition to $550 million.
ICE declared a quarterly cash dividend of $0.65 per share for the third quarter of 2014, payable on September 30, to shareholders on record September 16. The ex-dividend date will be September 12, 2014.
The company's board approved an additional $600 million in July 2014 under its share repurchase authorization program. During the third quarter of 2014, ICE has repurchased $350 million in common stock, with a total authorization of $700 million remaining under the program.
Looking ahead, ICE expects operating expenses for the third quarter in a range of $390 million to $395 million and operating expenses for fiscal 2014 of $1.55 billion to $1.56 billion. The expense guidance is net of acquisition-related transaction and integration costs for all periods.
In a separate statement, ICE said it has acquired intellectual property rights that relate to computerized trading strategies. The acquired intellectual property rights include U.S. Patent Numbers 7,177,833; 7,251,629; 8,498,923; 8,478,687; 8,660,940; 8,732,048; 8,725,621 and various related pending U.S. Patent Applications. Terms of the transaction were not disclosed.
The company noted that the acquired intellectual property rights include patent claims covering the use of an automated trading system to make price and trading decisions based on market price information. These intellectual property rights cover multiple asset classes traded electronically on exchanges, including futures, options and cash equities.
David Goone, chief strategy officer of Intercontinental Exchange said, "ICE acquired these patents with the goal of preventing third parties from using these intellectual property rights against our customers. ICE intends to make these patents available broadly for license to customers that provide beneficial liquidity in ICE's and NYSE's markets."
ICE closed Wednesday's trading at $192.22,up $1.06 or 0.55 percent on a volume of 738,753 shares.
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