Hello everyone and welcome to the ICE Fourth Quarter 2023 Earnings Conference Call and Webcast. My name is Charlie, and I will be coordinating the call today. You’ll have the opportunity to ask your question at the end of the presentation. [Operator Instructions] I will now hand you over to our host, Katia Gonzalez, Manager of Investor Relations to begin. Katia, please go ahead.

Good morning. ICE's fourth quarter 2023 earnings release and presentation can be found in the Investors section of the 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 2023 Form 10-K 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'll find a reconciliation to the equivalent GAAP terms in our 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 are 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. With us on the call today are Jeff Sprecher, Chair and CEO; Warren Gardiner, Chief Financial Officer; Ben Jackson, President; and Lynn Martin, President of NYSE. I'll now turn the call over to Warren.

Thanks, Katia. Good morning, everyone, and thank you for joining us today. I'll begin on Slide 4 with a summary of our strong fourth quarter and some key highlights from our record 2023 results. Fourth quarter net revenues totaled a record $2.2 billion and pro forma for the acquisition of Black Knight increased 7% versus last year. For the full year, revenues totaled a record $8 billion and on a pro forma basis increased by 4% year-over-year. Fourth quarter adjusted operating expenses totaled $952 million, $3 million below the low end of our original guidance range driven by lower compensation expense and acceleration of expense synergies. This strong performance helped to drive fourth quarter earnings per share of $1.33, up 6% year-over-year and record full year adjusted EPS of $5.62, also up 6% versus 2022. 2023 free cash flow totaled a record $3.2 billion enabling us to return nearly $1 billion to shareholders through dividends, while also continuing to make strategic investments to reserve September acquisition of Black Knight. These strong cash flows, as well as the full divestment of Black Knight’s stake in Dunn & Bradstreet enabled us to reduce debt outstanding by roughly $700 million in the fourth quarter and by $1.4 billion since we closed on our acquisition in early September. As a result, adjusted leverage ended the year at approximately 4.1 times pro forma EBITDA. Now let’s move to Slide 5 where I’ll provide an overview of the performance of our Exchange segment. Fourth quarter net revenues totaled a record $1.1 billion, up 14% year-over-year. Transaction revenues of $781 million were up 22% in part driven by a 31% increase in our interest rate business and record energy revenues which grew 46% year-over-year. This strong performance included a 41% increase in our oil complex, 66% growth…

Thank you, Warren, and thank you, all for joining us this morning. Please turn to Slide 9. We are pleased to report another record year for ICE. Our strong 2023 results were in part driven by a dynamic macroeconomic environment. But more importantly, underpinning that performance, our long-term secular tailwinds that will continue to drive growth across asset classes in a variety of macroeconomic environments. Across our energy markets, the depth and breadth of our global platform not only drove records across volumes and revenues in 2023, but it positions us well to capture secular tailwinds across our energy complex including the globalization of natural gas and the clean energy transition. In our oil markets, we’ve invested in building a global platform that positions us well to provide the critical price transparency across the energy spectrum that will help enable participants to navigate the clean energy transition. Most recently, ICE’s Brent benchmark underwent its latest evolution with the addition of Midland WTI into the Brent basket. This latest evolution contributed to record Brent volumes in 2023, surpassing the record last set in 2021 and demonstrating that the market depends on its ability to reflect global fundamentals. At the same time, our WTI contract reached record volumes and continues to gain share. In addition, as trade dynamics evolve and become increasingly complex, customers are not only seeking liquidity in the major global benchmarks but also in products that provide greater hedging precision. This trend is illustrated by the record trading activity in our other crude and refined products in 2023 with volumes up 35% year-over-year. This strong performance has carried into 2024 with January ADV surpassing the record last set in March of 2020 and at the same time open interest is up 36%. In our natural gas markets, we’ve adopted…

Thank you, Ben. Good morning, everyone, and thank you for joining us. Please turn to Slide 10. 2023 was a unique year for the energy markets. The year kicked off with a European ban on the import of Russian crude oil and a $60 Russian oil price cap imposed by the US, Japan, Canada and Australia, all driven by the Ukrainian conflict and a forced realignment of the global energy supply chain. In October, painful conflict with Israel erupted that is testing relationships within the energy producing Middle East and which caused the US house of representatives to send the bill to the US senate imposing further sanctions on Iranian oil. In November, terrorists began attacking ships navigating the Red Sea, causing the world’s largest operators of crude oil tankers to modify their supply chain operations out of their region. And throughout 2023 OPEC+ met the set quotas to cut oil production attempting to drive oil prices higher for the benefit of Russia and Middle East producers. With this complex geopolitical backdrop, it would be reasonable to assume that we ended 2023 with oil prices pushing towards record highs. Well, that’s not the case. Brent crude oil actually ended the year with prices lower than where the year started marking the first annual price decline since the COVID collapse. Even the recent supply shocks in oil shipped from the Red Sea failed to rally oil prices for more than a day or two. When we acquired the former International Petroleum Exchange of London in the early 2000s its flagship product was a small futures contract on or then not well-known of oil called Brents. The Brent oil field consisted of four deepwater oil platforms built in the 1970s in the middle of the North Sea between Scotland and Norway. The…

[Operator Instructions] Our first question comes from Craig Siegenthaler of Bank of America. Craig, your line is open. Please go ahead.

Hey, good morning, everyone. We wanted a follow-up on the client attrition commentary at Black Knight and the flat recurring revenue target that you provided in the prepared remarks and we are curious where are the clients going and why are they leaving just given your compelling value proposition with both MSP and Encompass under the same book now?

Thanks, Craig. This is Ben. And in terms of attritions that we saw, a couple of our clients that have been subject to mergers and acquisitions. On the same token though, we see a benefit from it. And a couple of obvious examples would be JPMorgan buying First Republic. Those moves – those loans have moved and are moving on to MSP and then you’ll also have RoundPoint and Two Harbors that have come together and have consolidated their loans on MSP. So when you see that type of M&A activity on the servicing side, it’s been pretty much a net-net. If you look across our overall mortgage segment and just looking at the flat performance that we had last year in terms of recurring revenue and the guide Warren gave this year. Underneath that I think it’s important that we are very confident that based on the sales success and the low attrition that we have had that we are clearly gaining share against both proprietary systems, as well as third-party peers during this tremendous decline in market volumes which in particular is on the origination side of the house. And I’d be – it’s important to highlight as well that 2023 was a generational low in terms of mortgage transaction volumes. So we went back to data that we see as far back to 1991 to find a year that was as bad and it was actually 1991 that was even close and even that year was better. So to us, markets revert to a mean and if you look at the average from 1991 to 2023, the average is around 10 million loans, the mean was around 8, I think we put a conservative band around that 7 to 10 million loans given the market share gains that we’ve had. The significant customers that we are winning and implementing. We believe this platform is springloaded for growth as we turn the corner.

And Craig, I will make that too on the flat guidance for recurring revenue. So on the implementation side, just to reiterate what Ben said that we do have some good visibility into some of the MSP and Encompass sales that are coming online throughout the year and those are the products that are going to really move the needle. On the erosion side, absent of course the one that I mentioned around M&A. Renewals on Encompass and customer engagement, that’s some of the stuff that pressures last year. We still expect some of that, but we’ve seen those trends start to stabilize and actually start to improve in the fourth quarter and into early this year. What I obviously don’t know it’s had visibility into is some of those things like an M&A activity related to our customers. But overall, we feel pretty good about that guide and Ben touched on this too. I think it’s important to really note, well, of course those recurring revenues are important. A lot of these products are also going to have a transaction component to it. And as he noted, we are coming off with the worst year for originations in a generation, but we’ve continue to add new customers, the current customer base is continue to add additional products and we’ve expanded that network. So that when those transactions do normalize, we are going to be really benefiting from that not only on the recurring side, but I think on the transaction side as well. And maybe to help frame that a little bit for you, I think if you were to see industry loan volumes in that $7 million to $10 million loan range, again with $10 million being the average over the last 30 years, we’d see a couple $100 million to nearly $0.5 billion of incremental transaction revenue and that would be a revenue that would be coming at really high incremental margin. So, look, we are focused on investing in the platform, expanding the network, so that we are best positioned for when this market normalizes.

Thank you. Our next question comes from Simon Clinch of Redburn Atlantic. Simon, your line is open. Please go ahead.

Thanks for taking my question. I was sort of interested in how you would frame, I guess, when we look at, could you give us a sense what the market origination market was like in the fourth quarter in terms of unit volume growth? And then ultimately, just how you are thinking about the potential product springloaded recovery? What are the sort of mortgage rate conditions you can – we need to see that kind of real inflection and acceleration starts compared futures with quota? Thanks.

Thanks, Simon. In terms of composite estimates that are out there, so if you look at the industry bodies that put out industry volume estimates, the market was approximately down 11%, what our modeling shows and if you take a composite of the industry analyst that’s above where it is. I think in terms of couple data points I can share as I said, there is no question in our mind that we are gaining share in terms of against both proprietary platforms and third-party platforms and a lot of those clients because they are significant in size or in the implementation phase. So the benefits we’ll get from recurring revenues will take some time as we implement those clients. The other benefit that we get when those clients are implemented is that those are new loans on our platform that will get per closed transaction fees on and those loans will also interact with hundreds of third-party service providers we have on our network. So when you are ordering a credit report for example, we get a fee for the efficiency that we provide on ordering those services on our networks. So those are additional transaction revenues that we would also benefit from in that case. The other thing that I’d say is that if you look at closed loans on our platform as we look at the closed loans that we saw on our platform were roughly mid-digit percentage points ahead of where the composite estimates are which further is evidence that we are gaining share and springloading this platform for when market volumes stabilize and Warren gave that range of couple hundred million to a half a billion in his comments just a minute ago. So I think that helps to frame when we say that the business is springloaded what that actually means.

Thank you. Our next question comes from Ken Worthington of JPMorgan. Ken, your line is open. Please proceed.

Hi. Good morning. Thanks for taking the question. I wanted to follow-up on your comments on energy. Maybe first touch gas Hawaii has doubled over the last year. How much of the European gas market is on exchange at this point? And where does this go relative to sort of the OTC market? Where is that balance? And in oil, you called that the share shift to ICE and WTI that seems to coincide into some extent with the reconstitution of Brent, what is driving the share shift to ICE and TI? And how much further do you think there is to shift there?

Hey, Ken. It’s Ben. Thanks for the question. So I’ll start on TTF. So, TTF, a lot of that volume is now on exchange and has transitioned over 10 plus years that we’ve seen that transition happening. I think the next step in the evolution of TTF that we see and I alluded to this in my prepared remarks is that, this is becoming and really has become the global benchmark for natural gas around the world. And it’s being more and more as a proxy for, when you are trading LNG and that’s seeing shifts around the world, which you can underestimate and you follow these markets very closely, you can underestimate the impact of the liberalization of natural gas has had to really creating a global natural gas market. It’s no longer subject to being secular pipeline infrastructure and storages. It can be freely transported around the world. And that is where we are seeing the growth in the TTF contracts and that’s why we constantly point out we are seeing new records, double-digit growth in terms of market participants, significant double-digit growth in terms of data subscriptions in TTF. TTF is up 100% in open interest year-over-year, 45% in ADV this year as more and more clients as they are looking at global issues around the movement of LNG out of the US going into Europe. They need to think about longer term implications of the White House recently announcing pauses on new LNG exports going out. US LNG heading east bound that goes through the Red Sea and Jeff alluded to it in his comments impacts that the attacks in the Red Sea it had on shipping there. US LNG going out of the Gulf going to Asia and when it’s going west bound has to…

Thank you. Our next question comes from Ben Budish of Barclays. Ben, your line is open. Please go ahead.

Hi, good morning and thanks for taking the question. I wanted to circle back to the Mortgage segment. Just on the cost side, Warren, it sounds like you accelerated some of the cost synergies in 2024. Is there anything more we can read into that in terms of the potentially the total bucket of synergies identified or the pacing of the additional synergies beyond what you see this year? And then, one other question that’s sort of come back along the same lines in terms of not so much cost synergies but perhaps things that ICE could do. Now that you and Black note that that Black Knight was unable to do while the merger was sort of pending. Any update in terms of additional cost reductions that are not quite true M&A synergies but just other things you may be able to do there? Thank you.

Yeah, sure Ben. So, yeah, look, I think it’s a testament to the organization in the sense that we were very well prepared for this deal to close and we really hit the ground running. And so, not only is a testament to the ability for us to kind of get all of our ducks in a row, but also just flexing the muscle that I think we’ve shown over the last number of years that integrations like this it’s definitely a skill set of ours. So, I think to some extent it’s very much a testament to do those two things in terms of us being a little bit better than we initially spoke to when we announced the deal around our Year One synergies. So, look, it does certainly make us feel comfortable about getting to our target of $200 million by the end of year five having coming in as strongly as we are right out of the gates here. But as we move through this year, I think we will take the opportunity to see how that unfolds and if there is any clarity on that and if there is potential to increase those, we’ll certainly let you know. But right now, look we are five months into the same things are going very well and we are really just making progress towards those targets.

And Ben, I’ll pick up on that on other things that we are seeing. We’ve mentioned on prior calls things like our proprietary cloud being something that’s – that we are very proud of in terms of the scalability, the architecture, the operational resiliency, the cyber capabilities that we have there. So we see an opportunity over time to move some of the core technology platforms there to our proprietary cloud and we are planning around that right now and there is a lot of benefits our clients will get from that. Other things that we see is, we are enhancing the MSP platform. So that’s SaaS-based platform that MSP has. We are continuing to enhance this. Leveraging our experience in upgrading technology. The analogy we’ve used in the past, we have to upgrade technology while the cars are driving over the bridge. We have done this time and time again and once business at NYSE and with our ICE Data Services business. So leveraging our expertise is scalable, distributed architecture is all things that we are going to apply towards the enhancements of MSP and making it as efficient of an enhancement as possible. And then the last thing I’d say is, we’ve moved our Black Knight data team. That’s come over, in particular the product team over to our ICE Data Services division and the reason we did that is we think there is going to be two benefits from that. Number one is from the technology side, are there technology capabilities within ICE Data Services or Black Knight that both sides can take advantage of and the early returns are, yes there are. And then number two is our product innovation. There is a number of data sets within Black Knight that are highly applicable to the capital markets space and we believe that with our capital markets expertise within ICE Data Services, there is a lot of new product innovation that we can put out there that will generate benefits both short and medium term.

Thank you. Our next question comes from Brian Bedell of Deutsche Bank. Brian, your line is open. Please go ahead.

Great. Thanks. Good morning, folks. Thanks for taking my question. Maybe just focus on the revenue synergy side in Mortgage tech. I think you said you’ve signed $30 million of the $125 million total so far in just five months and then the $125 million is the five year target that it seems like you are tracking. You are well ahead of that and then maybe just sort of correlating that with the commentary you had a couple of calls on the $300 million of revenue synergy opportunities that you’ve identified. Just trying to see if the $30 million is part of that $300 million? And I guess the broader question is, do you feel like you are also tracking ahead maybe well ahead on the revenue synergy side as you are on the expense review?

Thanks, Brian. And you categorize that $300 million that I outlined before. And I think what we are seeing is that the clients one they appreciate and have had a lot of experience working with ICE and our test capabilities have running highly efficient utility type technology infrastructure for them. And that we do this in very efficient ways and we have deep relationships with all of these clients, which I think has really accelerated our ability to hit these revenue synergy targets. And getting ahead of that is quickly as we have only being five months after we’ve done the deal. If you look at the three categories I outlined there, there is one of cross-selling Encompass into roughly 40 of the top 100 MSP clients. And right out of the gates we had a big win there. We mentioned JPMorgan Chase in 2023 that we obviously have big relationships with across all of ICE. And then, in the fourth quarter we added M&T Bank very quickly after we closed. So those are some great examples and that that fit into that first category that take time to implement. The second category is cross-selling MSP into our ICE Mortgage Technology client base. We have thousands and thousands of lenders that are in the ICE Mortgage Technology client base that are leveraging various pieces of technology from us and right out of the gates we had some significant wins in the fourth quarter, Fifth Third Bank, another big super regional bank is in the process of moving to MSPs. That was a great win. I mentioned Black Hills Federal Credit Union in the fourth quarter. They are an ICE Mortgage Technology client as well as Mortgage Solutions of Colorado. And then in my prepared remarks, I also mentioned CapEd Credit…

Thank you. Our next question comes from Dan Fannon of Jefferies. Dan, your line is open. Please go ahead.

Thanks. Good morning. Warren, just a question on the balance sheet. I think you said $700 million debt paydown in quarter-over-quarter. That’s probably a bit elevated. But what is a reasonable kind of quarterly pace and as you think about that progress, also do you anticipate being able to buy back stock as you kind of get towards the latter part of this year or early next year? What’s the reasonable timeframe to think about the capital return story improving?

Sure. Thanks, Dan. So I think, look, we don’t give sort of forward free cash flow guidance. But we certainly did just report a strong year at $3.2 billion of free cash flow with only about a quarter or so of Black Knight in there. So, that coupled with growth. I think it’s fair to assume that’ll be better than that in 2024 at the end – as we said, at the moment, our plan is to return the vast majority of that not return I should say, our plan is to use the vast majority of that to pay down the outstanding debt that’s out there today. And so, I think is we are thinking about that in the go forward here. I still think we are on track here as we’ve talked about where we thought for that paydown schedule being sometime in 2025, but depending on forms this could be a little bit earlier in that, as well. So, we are going to have to just sort of see how the year plays out ultimately, but as I said, very much on track to what we thought we’d be and where we would be in terms of our deleveraging phase.

Thank you. Our next question comes from Kyle Voigt of KBW. Kyle, your line is open. Please proceed.

Hi, good morning. So last year in May, you increased futures transaction fees for the first time in many years. Some of your competitors have announced pricing changes again for 2024. So I just wanted to circle back on how those pricing changes in May were digested by the market. And can you provide some updated thoughts on how you are thinking about pricing across the futures complex at this point and whether anything is planned for 2024?

Sure. Kyle, it’s Warren. So, as we said in the past, back in May, you are right, we did increased a couple of contracts across our oil business that something we hadn’t done in a number of years and I’d say it went pretty well. I think you saw the impact – we see to some extent as we move through the year and obviously the volumes were record levels and continue to be so in January of this year, as well. So I would say that that was – that went well. As we’ve said to you all in the past, our philosophy is to really look across the platform and look for areas where we have created value and where we can then go capture value. And so we do that every year and we think about it in different ways or utilize it in different ways and as we think about this year what we’ve done within the futures business, we did make some adjustments to the exchange data fees. We’ve done some price adjustments around some of the energy contracts outside of our oil business and then we also made some adjustments on collateral fees at the clearing house which in aggregate actually we are pretty similar to what the impact would have been or was I should say from the changes we made to the oil contracts last year. So, again, we’ve done a similar exercise but executed it in somewhat of a different way and I think that’s part of the opportunity we have going forward as we think about the futures business and ICE probably in terms from a pricing strategy standpoint.

Thank you. This is all the time we have for questions today. So hand back over to Jeff Sprecher, Chair and CEO for any closing remarks.

Well, thank you, Charlie for managing the call for us this morning. Before we leave, I wanted to mention that every quarter for the last ten years before and after these earnings announcements, we receive a call and input from a shareholder named Jack Willins. And we didn’t hear from Jack this week. So we did some outreach and learned that he had recently passed at age 88 and I just wanted to acknowledge the fact that his family and friends and colleagues that we also miss hearing from him. And we are going to go back to work after this call to continue to build this all weather business model and that’s what he would have wanted us to do. And so today, we will do it in his honor. Thank you.

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may all disconnect your lines.