Intercontinental Exchange, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing, not a standalone fourth-quarter report; fourth-quarter items are noted where material. ICE provides exchange and clearing, fixed-income data and services, and U.S. mortgage technology through three reportable segments.
Financial performance
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue, less transaction-based expenses | $7.146 billion | $6.036 billion | +18% |
| Operating expenses | $3.697 billion | $3.003 billion | +23% |
| Operating income | $3.449 billion | $3.033 billion | +14% |
| Operating margin | 48% | 50% | Down 2 points |
| Net income attributable to ICE | $4.058 billion | $2.089 billion | +94% |
| Diluted EPS | $7.18 | $3.77 | +90% |
| Adjusted net income attributable to ICE | $2.910 billion | $2.449 billion | +19% |
| Adjusted diluted EPS | $5.15 | $4.41 | +17% |
| Operating cash flow | $3.123 billion | $2.881 billion | +8% |
Adjusted measures are non-GAAP and exclude items management considers outside core operations. The 2021 GAAP net income increase chiefly reflects gains on the Bakkt transaction and sale of the Coinbase investment; it is not a comparable measure of underlying operating growth. The effective tax rate rose to 29% from 24%, partly due to those transactions and U.K. tax-rate changes.
Segments and notable trends
- Exchanges: Revenue less transaction-based expenses was $3.856 billion, up 6%. Energy futures and options revenue rose 10%; financial futures and options revenue rose 10%. Cash equities and equity options revenue declined 8%, while exchange data and connectivity rose 6% and listings rose 7%.
- Fixed Income and Data Services: Revenue was $1.883 billion, up 4%; operating income was $529 million, up 7%. Fixed-income data and analytics rose 6% and other data and network services rose 8%; CDS clearing revenue fell 8%.
- Mortgage Technology: Revenue was $1.407 billion, up 137%, and operating income was $397 million, up 162%. Growth largely reflects the full-year contribution of Ellie Mae, acquired in September 2020, as well as mortgage-platform activity. Mortgage lending volumes and refinancing activity remain sensitive to interest rates.
- Recurring revenues increased to 49% of the company’s total in 2021, from 34% in 2014, according to management.
Cash, debt, and capital allocation
- Cash and cash equivalents were $607 million at year-end, versus $583 million a year earlier. Restricted cash was $1.433 billion. Separately, $145.9 billion of cash and cash-equivalent margin deposits and guaranty funds were held for clearing operations and are not available for ICE’s general operating needs.
- Total debt was $13.9 billion, down from $16.5 billion. This included $12.9 billion of fixed-rate senior notes and $1.0 billion of commercial paper. The $3.8 billion revolving credit facility had no borrowings; $2.6 billion was available for general corporate purposes after specified backstops and commitments.
- ICE reported $3.123 billion of operating cash flow. Capital expenditures were $179 million and capitalized software development costs were $273 million. 2021 investing cash flow was negative $786 million; financing cash flow was positive $62.026 billion, substantially affected by a $65.7 billion increase in clearing-member margin deposits and guaranty funds.
- ICE paid $747 million in dividends, or $1.32 per share, and repurchased $250 million of shares. The board authorized $3.15 billion of future repurchases effective January 1, 2022. Management estimated 2022 capital expenditures and capitalized software costs together at $490–$520 million.
Material changes, outlook, and unusual items
- Bakkt: Following Bakkt’s October 2021 merger with VIH, ICE retained an initial 68% economic interest but held a minority voting interest and deconsolidated Bakkt in the fourth quarter. ICE recorded a $1.4 billion pre-tax gain and $92 million of estimated post-merger equity-method losses. The investment’s carrying value was $1.6 billion at year-end.
- Coinbase: ICE sold its investment in April 2021 for approximately $1.24 billion and recorded a $1.23 billion gain.
- Management described 2021 as a record year for revenue less transaction-based expenses. It expects continued investment in exchange, data, and mortgage technology platforms, but did not provide broad earnings or revenue guidance in the supplied filing text.
- Management said the ultimate business impact of COVID-19 remained uncertain. Pandemic-related volatility supported trading activity in some markets, while mortgage activity, customer operations, remote work, and technology supply chains remained exposed to changing conditions.
- Key risks include clearing-member defaults and collateral or investment losses; cyberattacks and system outages; regulatory changes affecting market-data and connectivity fees, U.K./EU access, benchmarks, and clearing; competition and technology change; mortgage-market contraction; foreign-exchange movements; and execution and integration risks from acquisitions and the Bakkt investment.
- ICE stated it did not believe pending legal matters would materially adversely affect consolidated financial condition, results, or liquidity, while acknowledging that developments could materially affect a particular period. Notable matters include the Providence exchange litigation and the appeal in LIBOR litigation. The SEC’s $8 million PRD settlement was concluded in 2020; the CME SPAN dispute was resolved in 2021 with an approximately $16 million judgment.
Important facts for investors to verify
- Underlying growth and margins apart from the Coinbase and Bakkt gains, acquisition-related costs, and other non-GAAP adjustments.
- Mortgage Technology’s organic growth, profitability, and sensitivity to mortgage origination volumes and interest rates after the Ellie Mae acquisition.
- Bakkt’s performance, valuation, and the implications of ICE’s economic ownership versus minority voting interest.
- Debt repayment and refinancing needs, commercial-paper rollover exposure, and the capacity available under the revolving credit facility.
- Clearing risk exposures, collateral investment safeguards, and the distinction between clearing-member funds and ICE’s own available liquidity.
- Developments in market-data fee regulation, U.K./EU equivalence and clearing rules, LIBOR transition, and material litigation or tax contingencies.