Intercontinental Exchange, Inc. Q2 2026 & Acquisition earnings call

Good morning. ICE's second quarter 2026 earnings release and presentation can be found in the investor section of ice.com. These items will be archived, and our call 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 subject to risks, assumptions, and uncertainties. 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 2025 Form 10-K, 2026 second quarter 10-Q, and other filings with the SEC.

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 will find a reconciliation to the equivalent GAAP term 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. Throughout this presentation, unless otherwise indicated, references to revenue growth on a constant currency basis.

Please see the explanatory notes on the second page of the earnings supplement for additional details regarding the definition of certain items. We'll be discussing our recently announced acquisition of MarketAxess. ICE, MarketAxess, and the respective directors and executive officers may be deemed to be participants in the solicitation of proxies from MarketAxess stockholders. These statements today do not constitute an offer to sell or buy, or the solicitation of an offer to sell or buy any securities or solicitation of any vote or approval.

Investors and stockholders should review the proxy statement and any other documents MarketAxess may file with the SEC in connection with the acquisition. With us on the call today are Jeff Sprecher, Chair and CEO, Warren Gardiner, Chief Financial Officer, Ben Jackson, President, Lynn Martin, President of the NYSE, and Chris Edmonds, President of Fixed Income and Data Services. I'll now turn over the call to Jeff.

Thank you, Steve. Good morning, everyone, and thank you for joining us today. This morning, we reported the best second quarter in our company's history. Warren and Ben will take you through those results shortly. I want to begin on slide five with the announcement of our agreement to acquire MarketAxess, a step that will extend our track record of growth into one of the largest addressable markets in the world, the global fixed-income market. ICE was built on the conviction that opacity and inefficiency in markets are not permanent conditions.

They're challenges that technology can solve. Since our inception, we followed a consistent strategy to bring transparency, efficiency, and standardization to markets and to digitize the analog. Each market that we've taken on has grown more open and more electronic as a result. Our acquisition of MarketAxess will continue this strategy within one of the largest markets in the world. We've been assembling and building a fixed-income franchise. We've become one of the largest and most trusted providers of fixed-income pricing, reference data, and indices in the world.

Providing daily evaluated pricing on over three million securities. Our ICE indices serve as a benchmark for the global fixed-income market, with nearly $1 trillion in ETF assets benchmarked to them. In clearing, we operate ICE Clear Credit, the industry's leading CDS clearing house, and we run the ICE Global Network, connecting the financial community to our data, analytics, and execution. On the execution side, ICE Bonds was built through our combination of BondPoint and TMC, and it serves the trading desks of the largest wealth management firms in the country.

Names like Charles Schwab, Fidelity, Merrill Lynch, and Edward Jones, with deep liquidity and price discovery across municipal bonds, corporates, treasuries, and agencies. Having built strong distribution in the retail and wealth channel, we now see a clear opportunity to extend our reach into the institutional investor segment, where MarketAxess has a leading presence. By bringing these liquidity pools together, the logic is simple. We're building a global fixed-income network. First, we connect the full spectrum of liquidity, from retail to institution.

Second, we make our clients more efficient, improving their experience with a goal of reducing operating costs over time. Third, we turn the combined network into a compounding data and distribution engine. Please turn now to slide six. More than 2,100 institutional firms participate on the MarketAxess network using protocols that are recognized industry standards for institutional credit liquidity. Large asset managers, pension funds, and insurance companies transact at a different scale and through different protocols than the retail and wealth clients that we serve today.

MarketAxess is a leader in the institutional market with investment-grade and high-yield corporate bonds in emerging markets across approximately 30 local currency markets and in eurobonds with a growing portfolio. ICE Bonds is a leader in the retail and wealth channel, a complementary liquidity pool with a unique client base, trade sizes, and protocols. Putting these two together creates a fully integrated front-to-back ecosystem spanning the fixed-income market.

Retail and wealth flow, long separated from institutional flow, will be able to connect into a deep institutional pool. Institutional participants will gain access to the diversified order flow that retail and wealth channels bring. You've seen this broadening market trend in the U.S. equity securities markets, which we believe we can now further extend into the fixed income securities markets. Our offering of one of the most robust data sets in the world supports efficient price discovery across this broader channel. With fixed income markets, this matters more than most other asset classes.

There are millions of instruments, most of which trade infrequently, the single greatest challenge to any investor is finding the other side for a true representation of fair value. Connecting these two pools should dramatically increase the probability that a buyer finds a seller, this price discovery will benefit every market participant. We want to offer our clients a common set of rails. Whether a client moves upstream to institutional or downstream to retail, they will operate on the same connected infrastructure, creating real economies of scale.

MarketAxess will bring us a growing Treasury rates trading platform, which we plan to connect directly into our newly approved Treasury clearing system, extending our credit and fixed income network into the interest rate markets. Our cleared Treasury futures franchise was our fastest-growing product set in the last quarter, as Ben will discuss shortly. We look forward to extending these capabilities. Please turn to slide seven. A single connected network does more than deepen liquidity. It will simplify how our clients operate, reduce what costs it takes them to do so over time.

We plan to collapse a fragmented stack of execution venues, data vendors, and analytics providers into a single integrated workflow. Fewer connections, fewer reconciliations, fewer points of failure. The same should be true for our customers' technology spend. Clients will have access to pricing, liquidity, execution, and analytics through one platform and one connection. For generating alpha, a deeper, broader pool that means superior fills, tighter spreads, and lower market impact.

Layering ICE's real-time evaluated pricing and analytics into the workflow should lead to improved decisions. The results for our clients is simple. Better liquidity plus better data equals better transparency and better returns, achieved at a total lower cost. Moving to slide eight. The most powerful effect we're building is the classic ICE flywheel. More liquidity generates more transaction data. Combined with our evaluated pricing, this makes ICE analytics more powerful. More powerful analytics attracts more users. More users deepen the pool, a deeper pool generates yet more data.

Each turn of that wheel should compound the value of our clients and ICE. This is what produces the compounding cash flows that create values for our shareholders. An expanded fixed-income network is a direct channel to cross-sell ICE's evaluated pricing, reference data, and index data, including liquidity scoring, transaction cost analysis, and predictive pricing into the workflow of more than 2,100 institutional clients who need exactly these tools to better inform their execution.

Thanks, Jeff. Good morning, everyone, and thank you for joining us today. Please turn to slide nine. This transaction is a product of deliberate long-term view about where fixed income markets are going and the role ICE is uniquely positioned to play in that evolution. Let me walk you through the financial terms and our path to value creation. Today, we announced we have entered into a definitive agreement to acquire MarketAxess for $167 per share, representing an enterprise value of $5.7 billion.

The offer price represents a 33% premium to MarketAxess' closing price as of July 29th, and on a fully synergized basis, the transaction represents an EV to adjusted EBITDA multiple of approximately 10.6x. We anticipate the transaction will be immediately accretive to ICE's adjusted earnings per share in the first year post-close, with accretion improving as synergies are realized and the combined platform scales. The transaction value we've announced and intend to underwrite is supported by MarketAxess' recent mid-single-digit growth trajectory.

However, we believe that ICE's platform, our data, our network, our client relationships, and our track record of deepening engagement over time, when combined with MarketAxess, can accelerate that growth trajectory. Improving growth will take time and investment, but expanding the revenue potential of acquired franchises is a core competency at ICE, and the opportunity here is compelling. We expect to achieve approximately $100 million of annualized expense synergies, with one-third realized in year one, two-thirds by year two, and the full run rate achieved by year three.

These savings will be driven by the consolidation of corporate functions, real estate rationalization, vendor and technology overlap, and more efficient use of shared infrastructure across the combined platform. The transaction value we've announced and intend to underwrite is supported by MarketAxess' recent mid-single-digit growth trajectory. However, we believe that ICE's platform, our data, our network, our client relationships, and our track record of deepening engagement over time, when combined with MarketAxess, can accelerate that growth trajectory.

Improving growth will take time and investment, but expanding the revenue potential of acquired franchises is a core competency at ICE, and the opportunity here is compelling. We expect to achieve approximately $100 million of annualized expense synergies, with one-third realized in year one, two-thirds by year two, and the full run rate achieved by year three. These savings will be driven by the consolidation of corporate functions, real estate rationalization, vendor and technology overlap, and more efficient use of shared infrastructure across the combined platform.

The transaction will be financed entirely in cash through a combination of newly issued bonds, a term loan, and commercial paper. We expect the transaction to close in the first half of 2027, subject to regulatory approvals and customary closing conditions. Gross leverage is expected to peak temporarily around 3.4x pro forma EBITDA, and we are targeting a return to 3x or below within 18-24 months, fully consistent with the pace of deleveraging we have demonstrated following prior debt-financed transactions.

Our commitment to maintaining a strong investment-grade credit rating is unchanged. On capital return, alongside our deleveraging program, we expect to increase baseline share repurchases from $350 million-$400 million per quarter. Our board has recently authorized up to $4 billion of share repurchases. We intend to deploy that capital in a manner that is disciplined, opportunistic, and consistent with our obligations to creditors and our investment-grade rating. We also expect to continue to invest in the organic growth of our business and grow our dividend.

A combination of strong free cash flow and a clear capital allocation framework means we do not have to choose between investing in growth and returning capital to shareholders. In closing, this transaction represents the next logical extension of ICE's fixed-income strategy. We have spent years building the data, the network, and the infrastructure that makes fixed-income markets function more efficiently and transparently. MarketAxess will bring the execution layer to that foundation.

The result is a platform that serves the full workflow of global fixed income, from evaluated pricing and reference data through indices and analytics to electronic execution and post-trade processing. We are building the fixed-income market of the future, and we are doing it from a position of financial strength, operational discipline, and a proven playbook for integration and value creation. Now to the quarter. Please turn to slide 10. Our first quarter was exceptional because all three segments fired simultaneously in a high-volatility environment.

Our second quarter was also exceptional for a different but equally important reason. The platform continued to produce record recurring revenue and strong earnings despite a moderation in episodic volatility. That durability, compounding growth on top of growth in any environment, is precisely the model we have built. Second quarter adjusted earnings per share were $1.90, a second quarter record and the second-best quarter in our history. Net revenues were $2.7 billion, up 5%, and adjusted operating income was $1.6 billion.

Recurring revenues were a record $1.4 billion, up 8%, underscoring the visibility and resilience of the ICE platform. These results also compound on top of 10% revenue growth in the second quarter of 2025, itself a record at the time. On expenses, adjusted operating expenses were $1.038 billion, in line with our guidance range. Year-over-year growth was driven by performance-related compensation tied directly to the strength of our results, which is more than offset by revenues, accelerated technology investment in our data center footprint, and incremental D&A from product development work across FIDS and mortgage technology.

These are capacity-building costs funded by the revenues they are generating. Looking forward to the third quarter, we expect adjusted operating expenses in the range of $1.063 billion-$1.073 billion. Our full-year adjusted operating expenses are now expected to be between $4.190 billion and $4.230 billion, with the increase driven by further crystallization of performance-related compensation, our accelerated data center program, and a product development investment. All of which I would characterize as investment in future growth.

Thank you, Warren, and thank you all for joining us this morning. Markets are always evolving, and the breadth and depth of ours positions us to thrive in any economic or geopolitical environment. Our role does not change. We bring transparency and electronic liquidity to markets. As those rise, participation grows, customers gain precise new data to hedge and trade with, and the market deepens. You can see it in this quarter's results. Total open interest across our futures and options business was up 20% year-over-year.

Participation continued to broaden, and our market data user base grew 10% year-over-year. Customers are relying on our markets more, not less. Financials had an exceptional quarter, driven by European and U.K. rates. The defining event was the reversal of the global easing cycle. In June, the ECB raised rates for the first time since 2023, and the expectations for rates across major economies repriced sharply higher. When rates move like that, our customers come to us to manage the risk.

In this quarter, you could see how much they leaned on us. In June, open interest in our rates franchise reached a record of 53 million contracts, up over 50% year-over-year, and Euribor options, OI, set a new all-time high, passing a record that stood since 2010. To put the scale in perspective, the total value of the positions that customers hold across our three main European and U.K. rates contracts, Euribor, SONIA, and €STR, reached $62.3 trillion in mid-June. That is roughly triple where it stood three years ago.

It now exceeds the comparable market tied to U.S. dollar rates for the first time. Simply put, more and more of the world's short-term interest rate risk is being managed in the markets we operate. What makes that durable is that some of the major central banks, the ECB, the Swiss National Bank, and the Bank of England, are increasingly moving in different directions. Our customers need to manage that risk across all of those currencies in one place. Our multicurrency franchise lets them do exactly that in a single liquid market with capital-efficient clearing.

No one else can match that breadth. That strength runs across the portfolio. In Q2, SONIA average daily volume was up 39% year-over-year, and EURIBOR up 12%. The momentum has carried into the third quarter, with financials open interest up 40%. Please turn to slide 14. Energy volumes were softer this quarter. The more important story underneath is structural. Even against a very volatile second quarter last year, total OI across our energy markets was up 8% year-to-date because customers keep their risk on our books through the cycle rather than stepping away.

We are in the middle of another reconfiguration of global supply chains, this time centered on the Middle East. It coincides with the rewiring of European energy that followed the Russia and Ukraine conflict. Over the prior decade, the liberalization of global LNG trade had already turned our TTF contract into the global benchmark for natural gas, following the same path Brent set in crude. Years later, that franchise is still compounding, with TTF participation growing double digits on average over the last five years.

The number of customers subscribing to our TTF market data up more than 17% year-over-year in the second quarter. That strength runs beyond TTF. Across our energy markets, OI has grown 9% on average over the last five years. The energy behind that is options, where OI has grown 18% on average, more than 4x the pace of futures. Options now make up 40% of our energy OI, up from roughly a quarter in 2021. This options growth matters because it is another sign of how deeply customers rely on us.

Options are how they manage complex, longer-dated risk. Once that positioning is on our books, it tends to stay. We have studied the durability of options positions versus futures, and the result was clear that options positions tend to be held for a longer term, often are held to expiry, and many clients hedge their delta risk with futures, providing a net benefit to the underlying futures market at the same time. Participation has broadened alongside it, with options participation growing 8% on average, double the pace of futures.

That is customers building deeper and more sophisticated hedges, representing structural demand. Reconfiguration means more complexity, not less. Trade routes redraw, new regional benchmarks emerge. Basis risk multiplies across the system. More complexity means more risk to manage. That is exactly what a global all-weather benchmark platform is built for. From Brent and seaborne crude to TTF and global gas flows to JKM as demand shifts east. The shape of the curve makes the point.

Trading is naturally busiest in the prompt months. OI, which is where our customers carry risk, sits much further out. Across the energy complex, about 12% of OI sits in the front month. More than half sits beyond six months. That is the signature of a structural, long-dated risk transfer, not front-of-the-curve trading. The same forces are reshaping how the world prices oil, it plays to our greatest strength. As trade routes redraw, global participants move to manage their risks in the deepest, most trusted benchmarks.

With the backdrop of the Iran War and continued tensions in the Middle East. We have seen a combination of more risk to be managed, but concerns around doing so with a physically settled contract as a result of uncertainties with the closure of the Strait of Hormuz. We've seen a shift to our more liquid Dubai contract from our Murban contract to manage these risks. Brent anchors the global crude market, and Dubai, which prices a basket of Middle East grades, is growing into the key cash-settled benchmark for the region, trading alongside Brent, with the Brent to Dubai spread pricing the flows of barrels between east and west.

We believe that this consolidation of liquidity in one regional Middle East marker may be the result of a permanent shift, providing ICE yet another growing energy benchmark. Those sit within a broader network we own that prices oil across the globe, from Brent to Houston to Western Canadian Select, connected to roughly 800 regional oil freight and NGL markers where we hold about 90% share. Very little of the world's oil trades without touching our markets.

Thank you, Ben. Please turn to slide 17. The through line here, MarketAxess included, is the one that we followed from the start. We find markets held back by friction and opacity. We bring our networks, our data, and our clearing to bear, we earn trust to operate at the center of them. That discipline is what lets us act on an opportunity like MarketAxess without ever reaching for growth that we've not earned. It's also why forces are reshaping our industry, from AI and automation to the changing needs of our customers, those work in our favor rather than against us.

We do not build for a moment in time. We build where our customers are next going. Growth on top of growth, compounding through all conditions. That's what we've built this company to do and how we plan to create lasting value for our shareholders. I'll now turn the call back to our moderator, and we'll conduct a question and answer session until 9:30 A.M. Eastern Time.