The operator introduces the ICE Third Quarter 2023 Earnings Conference Call and Webcast and hands it over to Katia Gonzalez, Manager of Investor Relations. Katia provides information on where to find the earnings release and presentation and mentions that the call may contain forward-looking statements. She also explains the use of non-GAAP measures and introduces the participants on the call. Warren Gardiner then takes over and thanks everyone for joining.

The speaker begins by discussing the key highlights of the company's third quarter results, including record adjusted earnings per share and a 4% increase in net revenues. They also mention that adjusted operating expenses were below the original guidance range due to reduced technology spend. The speaker then moves on to discuss the performance of the Exchange segment, noting a 10% increase in net revenues and strong growth in energy revenues, particularly in global natural gas. They also mention a reduction in term loan and CP outstanding since the acquisition of Black Knight in September.

Overall, the company has seen strong growth in their global oil business, with ADV up 40% and open interest up 26% year-over-year. For the fourth quarter, they expect OTC and other revenue to be in the range of $70 million to $75 million, with a temporary reduction due to a regulatory fee holiday. Recurring revenues have also increased by 4%, with 8% growth in Exchange data services. In the Fixed Income and Data Services segment, third quarter revenues were up 4%, with transaction revenues increasing by 6%. The desktop business saw double-digit growth, driven by demand from energy and environmental-focused customers and the adoption of large language models.

In the consolidated feeds business, revenue is expected to exceed $100 million for the full year due to past investments. The fixed income, data, and analytics business generated a record $279 million in the third quarter, with growth driven by the North American pricing and reference data business. In the Mortgage Technology segment, third quarter revenues totaled $330 million, with recurring revenues accounting for nearly 80%. Despite industry challenges, sales remain strong and have already surpassed the previous year's record for new sales. The closing of the Black Knight transaction has also led to a significant increase in MSP customer signings, setting 2023 on track to be the second best year for MSP sales since 2017. The current pipeline for MSP is at its highest level in five years, indicating continued momentum in the future. However, strong sales results will take time to implement.

In the fourth quarter, the company expects to face challenges due to cyclical headwinds and seasonal pressures, but still projects strong revenues. The company remains focused on meeting customer needs and creating value for shareholders. The recent acquisition of Black Knight has been successful and the company is impressed by the collaboration between teams. The company's network thrives by offering efficiency gains through the use of data and technology.

The execution of a strong value proposition drives the conversion from analog to digital in industries. The company has invested in creating a global energy platform to better serve the needs of their commercial customers. This has resulted in increased liquidity and open interest in their oil and natural gas products, with their European and Asian gas complexes becoming global benchmarks. Record revenues have been achieved in the natural gas complex and interest in their contracts remains strong, highlighting their significance in global price formation.

The company is well positioned to benefit from both short-term volatility and long-term growth trends in global gas and environmental markets. They have a strong presence in these markets and offer a broad range of products to serve customers as they transition to clean energy. Additionally, their Fixed Income and Data Services business is experiencing compounding revenue growth due to investments made to enhance content and functionality.

The company's year-to-date business has seen a 7% increase, driven by strong performance in desktop, derivatives analytics, and feed offerings. The company's investments in reducing workflow friction have led to double-digit revenue growth and an increase in users for their ICE Chat platform. Their consolidated feeds business has also seen accelerated adoption by large financial institutions, resulting in high single-digit growth. The index business has also seen double-digit growth in ETF assets under management. In the mortgage business, the company is taking advantage of the digital conversion happening in the industry and their network, along with Black Knight, is helping them outperform the industry. Their strategy of leveraging technology and data expertise is driving this success.

The company's strategy includes focusing on recurring revenue and offering a complete front-to-back experience for clients through their origination technology and data and analytics business. They have seen an increase in base subscriptions and have secured new clients, such as JPMorgan Chase, M&T Bank, and Fifth Third Bank, who have chosen their platform for loan origination, data and document automation, and servicing. These wins validate the company's vision of providing a comprehensive platform for clients.

The company plans to replicate successful relationships with current customers in order to grow their business in the mortgage origination market. They believe the trend of electronification will continue and give them confidence in their ability to tap into a $14 billion market. The company's success in the commodity trading and clearinghouse markets has been a result of taking advantage of changing regulations and challenging environments. They were able to build a sustainable solution for the CDS market and expand their business in response to regulatory changes.

The author shares stories of success to emphasize the importance of laying the groundwork for a strong future during times of stress. They also mention how regulation in the financial services industry follows periods of economic change and how ICE is investing in a consumer finance technology platform in the mortgage market. They highlight their aim to build financial market infrastructure and their success with clients like JPMorgan Chase, M&T Bank, and Fifth Third Bank. The current stress in the mortgage market is also fueling growth on their commodity hedging and credit protection platforms, leading to record third quarter earnings.

ICE is investing in adaptive learning tools, including large language models and learning algorithms, to automate workflows and improve compliance efforts. They have been using these tools for over a decade and have recently acquired a product that can recognize and extract data from various documents for mortgage underwriting. The model is based on a transparent rules engine and is being extended across their mortgage platform. ICE's experience in building and deploying these models allows them to understand the cost-benefit analysis of their deployment.

The New York Stock Exchange was rebuilt with modern technology while still in use, without inconveniencing customers. Similar upgrades were made to Interactive Data Corporation and MERS, resulting in a more efficient and successful platform.

In the third quarter, ICE achieved record revenues, adjusted operating income, and adjusted earnings per share, making it the best quarter in the company's history. This success is attributed to the company's ability to adapt to changing environments, embrace regulatory shifts, and invest in new technologies, while also focusing on customer solutions in various geographies and economic conditions. The company's strong execution and the trust of its customers are credited for these record-setting results.

The speaker discusses the impact of the Midland trading market on Brent and ICE's increased share in WTI. They mention investments in the global oil platform and the need for more precise instruments in pricing Middle East oil. They also note the growth of Brent in open interest and volume, seeing it as complementary to the Midland market.

The speaker discusses the company's investments in the U.S. and the growth of their contracts in various regions, emphasizing their complementary nature. They also address the recent success in the mortgage business, attributing it to the company's acquisition and the potential for a complete front-to-back experience for clients.

The company is experiencing success in their Encompass sales and MSP platform, with a record sales year and new clients being added. There was a pent-up demand for MSP, and deals are now coming through. The company has also added new data products and is not losing customers on the platform. However, it takes time to implement these clients and new loans under the platform.

The speaker discusses the company's strong loan growth and how it positions them well for future growth. They also mention improved sales cycles and potential pricing increases in the fixed income data business. The company aims to capture value for their customers and will continue to do so in the future.

Lynn Martin, speaking on behalf of ICE, provided insight into the company's recent performance. The segment has shown the resilience of ICE, with strong growth in ICE bonds despite low volatility in the muni markets. The company has also seen increased demand for front office tools and fixed income data and analytics, as well as a rise in money flowing into fixed income ETFs. This has resulted in a shortening of sales cycles and increased demand for ICE's indices and services. The company remains optimistic about its position to benefit from the trend of fixed income electronification and workflow optimization. Kyle Voigt from KBW asked a question during the call.

The recent NAR lawsuit decision in favor of plaintiffs has raised concerns about the impact on the number of buy-side real estate agents and their role in the mortgage market. This could potentially affect loan officers, who rely on buy-side agents as their largest referral pipeline. However, for Encompass, a company focused on improving efficiency in the origination transaction, this trend does not have a negative impact as they are neutral in the real estate agent space and their core businesses are centered around the origination process.

The Fixed Income and Data Services segment has faced challenges in revenue growth due to sales cycle and pricing pressure, but their all-weather nature and strong demand for products and services have helped contribute to the bottom line. The other data services business has seen acceleration due to investments in modernization and increased demand for automation. This demand is expected to continue as the industry adopts automation more broadly.

The company is optimistic about continued growth in the medium term due to the convergence of various factors, such as increased automation and customer demand for data centers. This has led to high sales in connectivity and desktop services. The automation trend has also benefited the company's feeds business, with new and existing customers valuing their modernization efforts. The adoption of the company's large language models in their chat platform is also driving growth.

The chat user growth for the company is up 13% year-to-date, and the increased usage in the models has driven revenue benefits and activity in the energy markets. The company expects this trend to continue driving growth in the medium to long-term. The revenue synergy targets for Black Knight are $125 million over five years, but there is also a potential for $300 million in revenue opportunities. However, it may take some time for these to be fully implemented and have an impact on revenue. The company expects the revenue synergies to have a hockey stick-like growth pattern.

The speaker discusses the mortgage market and how they get their information on mortgage originations being down nearly 20%. They mention looking at forecasts from organizations such as the NBA, Sandy and Freddie, as well as their own data on loan volumes and MERS registrations. They also mention considering these factors when making their fourth quarter guide for IMT pro forma revenues.

The speaker responds to a question about the company's performance in the mortgage market, stating that they have seen some success in closed loans and have other revenue sources that may create some noise. They also mention their continued success and adoption of new customers. The next question asks for an update on the company's ability to adjust pricing, specifically in the energy market, given recent changes and increased competition. The speaker, Warren, thanks the question and begins to respond.

The company is considering making changes to their pricing strategy for certain products and is currently in the process of budget planning. They will selectively adjust prices based on the value they provide to customers. In response to a question about potential opportunities arising from new capital rules for banks, the company stated that they will continue to focus on bringing OTC derivatives to the exchange-traded market, but did not provide a quantification of these opportunities. They also acknowledged that the proposed capital rules may make some products and businesses more capital intensive for banks, but did not specify which areas they see as having the biggest potential for growth.

Jeff Sprecher, CEO of ICE, discusses the potential impact of the Basel rules on their business and the uncertainty surrounding their implementation. He believes that any regulatory or government action that promotes transparency and standardization is beneficial for their company. He also notes that ICE has historically benefited from economic changes and is willing to adapt to regulation. The final question from the conference call is about fixed income.

Lynn Martin, a company executive, was asked about the allocation of assets under management (AUM) and the impact of yield profile differences between treasuries and munis on their business. Martin stated that there has been an increase in AUM for equity and fixed income indices, with higher capture classes such as high-yield and investment grade gaining share. The yield profile has resulted in muted volatility for munis during the summer months, but volatility has increased in the fall. There has also been growth in products such as CDs, money market products, and agencies. Overall, there has been good growth across all of their different products.

In the third quarter of this year, the company saw a 53% increase in transactions compared to the same time last year. The team has worked hard to expand their presence in the wealth and institutional sides of the business, positioning them well for the current market volatility. The CEO thanks the team and customers for their success and promises continued innovation and growth. The call has now ended.

This summary was generated with AI and may contain some inaccuracies.