2022 Letter to Shareholders

Let me start with a recap of how our company performed over the past year.

In 2022, ICE generated record net revenues¹, record adjusted operating income² and record operating cash flows. We marked our 17th consecutive year of record net revenues¹ since our 2005 IPO on the New York Stock Exchange. Total net revenues¹ were $7.3 billion, up 2% year-over-year, bolstered by our all-weather business model that I referenced above.

• In our Exchanges segment, which includes our futures network as well as the New York Stock Exchange, net revenues¹ increased 6% year-over-year to a record $4.1 billion. Results were highlighted by 21% revenue growth in our financials futures complex and a 5% increase in our exchange data services.
• In our Fixed Income and Data Services segment, we generated total revenues of $2.1 billion, up 11% year-over-year. Our continued efforts to build institutional connectivity to our bonds platforms contributed to record revenues in our ICE Bonds business, up nearly 100% year-over-year.
• In our Mortgage Technology segment, revenues were $1.1 billion, with recurring revenues increasing 16% in 2022.

On a consolidated basis, ICE’s adjusted operating income² for the year was $4.3 billion, up 4% year-over-year, and our adjusted operating margin² was 59%. Adjusted free cash flow² was a record $2.9 billion, up 3% from one year ago, which enabled us to return nearly $1.5 billion to shareholders, even while continuing to make strategic investments across our business. Finally, we increased our quarterly dividend by 11% to $0.42 per share beginning in the first quarter of 2023, extending our 10-year track record of double-digit dividend growth.

We also announced the strategic acquisition of Black Knight, a leading provider of mortgage technology, data and analytics. As I write this letter, that transformative deal is still under regulatory review by the U.S. Federal Trade Commission. Anticipating that the deal closes as planned, our strategy for ICE’s mortgage assets is to build an infrastructure that transforms the mortgage markets through the kind of automation for which ICE has long been renowned.   

Market participants had much to contend with last year, from February 24, when Russia invaded Ukraine, to December, as central banks around the globe raced to tame inflationary pressures.

From the beginning of the year to the end, our markets withstood these events as designed, offering investors a place to efficiently manage their risk in a transparent environment.

A key point our customers reiterate is how much they rely on the real-time price signals our markets send.

Many of these customers are the companies producing and providing the energy that keeps our homes, businesses, and lives fully powered.

Across our global natural gas business, the expansive breadth of our benchmarks was evident. As Europe looks for solutions to fill the void created by Russian natural gas no longer flowing to the continent, our North American natural gas markets benefitted from the new demand center created last year within the EU for U.S. LNG.

A similar dynamic is playing out in oil, with more U.S. barrels replacing European supplies which have historically come from Russia. The resilience and liquidity of ICE’s Brent benchmark as compared to other oil benchmarks is gaining attention, finishing 2022 as the largest commodity futures contract in the world as measured by notional USD.

In a similar vein, Gasoil, our global benchmark for refined products, last year faced a market that was initially self-sanctioning in the aftermath of the invasion and later became subject to EU sanctions on Russian oil. In response, ICE created a novel solution to change Gasoil’s contract specification to exclude Russian oil.

By any measure, it was a remarkable, and rapid, pivot. Never to our knowledge has a methodology existed for identifying the origin of co-mingled material such as diesel fuel. The success of this change, and its quick embrace by the market, was evident in the successful first delivery of Russian-free barrels on February 1, 2023. This has been accompanied by increasing volumes and open interest in Gasoil as the market returns to the contract as a trusted source of delivered diesel into Europe.

While immediate needs are met with fossil fuels, our diverse energy portfolio provides a crucial nexus for how companies are enabling the transition to alternative sources of energy. By offering deep liquidity in environmental products, customers use ICE to see price signals long into the future. This allows them to invest in the infrastructure and new technologies to provide the energy societies need both today and for the next generation.

An indicator of this transition is in our North American environmental markets. These markets traded again at record levels last year, while our U.S. renewable energy markets are gaining traction as states advance a variety of programs to spur adoption of renewable sources of energy.

There is substantial innovation underway in our environmental portfolio. Among the offerings we are excited about is hosting carbon credit auctions, which will allow companies to buy credits directly from project developers, connecting new customers to ICE and a range of forward-thinking carbon credit projects around the world.

In our interest rates portfolio, the efforts by central banks to address inflation created a vastly new risk environment for investors last year. This brought Euribor, the benchmark for managing euro interest rate risk, back into focus, marking the return of a giant to interest rate markets.

As the largest marketplace for U.K. interest rate futures, our customers felt the impact of the U.K.’s mini-budget last year, leading to intervention to support the Gilt market. The resulting turbulence highlighted the strength of ICE’s multi-currency, multi-benchmark offering across interest rates.

The reverberations of economic volatility were felt in our equity markets as well, where we noted a slowdown in the pace of initial public offerings on the floor of the New York Stock Exchange was offset by another strong year in trading volumes, with cash equity volumes growing at a CAGR of 11% over the last three years. Nevertheless, many companies that are already public have seen how the NYSE continues to be the principal intersection of investing, finance, and thought leadership, spurring an industry-leading 34 transfers of listings to our exchange.

In addition to our unique floor-based trading model and unparalleled media visibility, this particular metric highlights the substantial value the NYSE provides to our community of listed companies. While the successive record IPO years of 2020 and 2021 weren’t eclipsed last year as the public capital markets cooled off amid volatility and economic uncertainty, the energy in and around our building at 11 Wall St. was palpable from January through December.

Twenty world leaders, including six sitting heads of state, and a steady stream of U.S. Government officials visited the NYSE as we launched new initiatives in public policy, sustainability, advanced the rules governing direct listings, which we pioneered in 2018, and moved toward completing the rollout of our NYSE Pillar technology platform across all NYSE Group equity and options exchanges.

Every year, we work to further advance ICE’s mission to drive greater transparency and workflow efficiencies for our customers. In 2022, our Fixed Income and Data Services business played an integral role in furthering this core mission.

Buffeted by higher interest rates and the need for increased automation, the demand for access to new types of data, and continued interest among customers for passive investment strategies, our broad, all-weather fixed income and data services offering registered significant growth, despite the headwinds facing markets during the year.

ICE Bonds, which includes our fixed income trading platforms for corporate, government, agency and municipal bonds, had a record performance in revenue and trading volume.

Although the quickly changing interest rate environment played a role, this growth was also driven by investments we made to expand the number of participants accessing our fixed income trading platforms, as well as our efforts to grow the third-party venues distributing our trading data, driving liquidity to our markets. This increase in users, coupled with the volatility in markets and rising interest rates, provided significant tailwinds for ICE Bonds, and has positioned us well for the current year.

Similarly, our credit default swap (CDS) clearing business generated record revenues in 2022, increasing 59% year-over-year, as inflation uncertainty and geopolitical events contributed to increased market activity. Additionally, the recent introduction of CDS index options clearing offered new opportunities for customers.

As market structures have evolved, we have worked with our customers to provide the most efficient and lowest-latency connectivity to the venues that matter most to them through our ICE Global Network and Consolidated Feeds services. Following Euronext’s migration to Bergamo, Italy, and in response to demand from customers for low-latency connectivity to markets throughout the region, we expanded our wireless network to offer market data and private bandwidth services between Bergamo, Frankfurt, and London.

To bring our network and managed services offerings in Asia to closer parity with financial centers in the U.S. and Europe, we completed a significant expansion of the ICE Global Network, expanding access centers in Hong Kong, Shanghai and Tokyo. These investments allow ICE to offer a consistent service globally, providing ultra-low-latency and high resiliency to help our customers manage risk and find opportunities in the most efficient ways possible.

Finally, as customers manage their investments and businesses through the energy transition, we have leveraged our vast expertise in data management and delivery to expand our Sustainable Finance data service.

We acquired Urgentem, expanding ICE’s climate risk offering to include extended coverage of global public and private companies across new geographies, scenario risk analysis and stress testing for fund managers and banks.

Asset managers have become increasingly focused on providing climate-driven investment strategies. ICE’s ESG data, regulatory solutions and sustainability indices will be key in helping our stakeholders uncover opportunities, manage risk, create impact, and meet regulatory obligations.

As we move forward, our enthusiasm extends to keep expanding and evolving the products and services that make up our fixed income and data services business, another all-weather part of our business. From the digitization of the fixed income workflow, to the innovations we bring to connectivity and market data, ICE is well-positioned for long-term success and growth.

As I have shared throughout the course of this letter, ICE’s history has been marked by successfully bringing needed efficiencies and transparency to markets around the world. We are following that same playbook with our expanded presence in the U.S. mortgage industry.

After finding the home of their dreams, many buyers have shared the frustrating experience of securing and closing a mortgage for their new property. It takes longer than it should, costs more than it should, and is accompanied by mountains of manually-prepared paperwork often prone to error.

ICE has been on a journey to transform that experience. By leveraging our data and technology expertise to digitize this unnecessarily cumbersome process, we are helping borrowers and lenders save both time and money.

For example, a first-time borrower for a starter home faces the prospect of paying essentially the same amount in mortgage fees as someone purchasing a $1 million-plus property. That is regressive and is not right. Savings from increased efficiency in the process can and should be passed through to borrowers, allowing more people to achieve their lifelong dream of home ownership.

In 2022, rising loan origination costs and interest rates created a favorable environment to address inefficiencies in the mortgage business. By working continuously to improve access and reduce the cost of home borrowing, ICE’s goal is to transform the funding of U.S. home mortgages in the loan origination and closing processes.

Over the years, we have built these capabilities organically and inorganically. We took our next step in 2022, announcing our intention to acquire Black Knight, Inc., a provider of U.S. mortgage and real estate software solutions, data and analytics.

The addition of Black Knight will extend our life-of-loan platform, benefiting lenders, servicers, partners and, most importantly, the end consumer.

In the mortgage space, our work to connect people to opportunity does not end there. ICE’s data and analytics business is a major area of focus for our company, expertise which we are extending into mortgages. Leveraging our index business, we launched the ICE Rate Lock Index, using data gathered by our mortgage business to measure and report the interest rates at which mortgages are locked each day. We then developed a futures product based on this index to allow investors to more effectively manage mortgage interest-rate risk.

Because our mortgage business focuses on subscription to our technology, a sizable portion of our revenue stream is recurring. In 2022, recurring revenues in our Mortgage Technology segment accounted for nearly 60% of segment revenues, allowing us to outperform an industry that experienced a nearly 50% decline in origination volumes. This performance was driven in part by heightened demand for our data and analytics tools.

As we have seen over the past several years, the mortgage industry represents fertile real estate for ICE’s data and technology driven approach. The U.S. mortgage industry presents a roughly $10 billion addressable market where we can leverage our ability to reduce costs and build efficiencies through automation.

As with many leading companies operating today, sustainability is a core focus for ICE’s management team and our Board of Directors, and we continue to refine and expand our initiatives in this area to best support our shareholders, employees, and other stakeholders.

Outlined below are a few updates on the steps we are taking to increase transparency through our disclosures, expand diversity across our organization, and further reduce our carbon footprint. For a more comprehensive overview of our sustainability efforts, I encourage you to read our seventh annual sustainability report, which can be found on our website at ice.com/esg.

• Disclosure: We continue to supplement our disclosures with reporting frameworks including the Taskforce on Climate-Related Financial Disclosure (TCFD) report, Sustainable Accounting Standards Board (SASB) metrics, and the UN Sustainable Development Goals. In 2022, we expanded our reporting to include a stand-alone TCFD report that provides additional disclosures related to our management of climate-related risks, governance structures for risk management and analysis for measuring success against climate goals. We have added several reporting metrics to our SASB report from the IT Services and Software standard. We also founded the NYSE Sustainability Advisory Council to bring together sustainability leaders across our broad community of listed companies to identify and share best practices in sustainability.

• Diversity: We are focused on increasing and supporting diversity through three pillars: our employee population, our Board of Directors, and our community of listed companies. In 2022, we took the additional step of setting specific key performance indicators for certain segments that we believe will help increase diversity throughout our organization. Our efforts to add diverse members to our own Board have resulted in an outstanding slate of company directors that is comprised of 60% women and 30% who self-identify as people of color. We have seen remarkable success with the NYSE Board Advisory Council, which develops and provides access to a diverse pool of CEO-vetted, board-ready candidates for companies seeking directors. Since its founding in 2019, more than 30 candidates identified by the council have joined boards, and our pool of qualified candidates has grown to over 500.

• Climate: In addition to publishing a stand-alone TCFD report, we also reported all Scope 1, 2 and relevant Scope 3 emissions. We continue to focus on mitigating our greenhouse gas footprint through emissions reductions and the purchase of renewable energy and carbon credits. We recently set a near-term carbon reduction target to work toward a 50% reduction of Scope 1 and 2 emissions by 2032 and we are working with our supply chain partners to reduce Scope 3 emissions.

It is always a privilege to share my thoughts with our stockholders, many of whom are our employees and investors who have been part of our ICE community for a long time. Preparing to write this year’s letter, and thinking about what lies ahead, I looked through the commentary I provided for the last few annual reports and thought about what it portends for the future.

What a journey our world has been on over the past three years. In 2020, our work and home lives were upended by the coronavirus. In 2021, as a result of extraordinary action to respond to the pandemic, spending and economic activity spiked. In 2022, payback from those efforts, combined with the largest-scale land war in Europe since World War II, brought a recalibration for those who have benefitted from the sustained advance of financial markets since 2009.

I have always had faith in the power of technology and innovation to help address our collective challenges. Writing at the beginning of 2023, that faith is not diminished. The things we can now do from the palm of our hands are inspiring.

Many of ICE’s revolutionary advances that I have outlined above are harnessed every day by our customers, executing trade orders, hedging risks, and streamlining workflows. The work that we do to help anticipate what is around the next corner is good for them, good for their employees and industries, and good for the communities we inhabit.

Coming off a pivotal year in 2022, I have never been more grateful to our team for the work they have done to deliver record results and serve our customers. That gratitude extends to those same customers for their enduring trust and embrace of our evolving solutions, knowledge, and expertise.

The expertise that we bring to market is also good for our stockholders. We don’t know what the weather has in store for 2023, or 2024 or 2025. That’s why, since our founding days in 2000, when we were just a handful of entrepreneurs with a vision of market transparency and persistent focus on problem-solving, we sought to build, and are always in the process of building, our all-weather company for all seasons and conditions.

That’s the ICE that you own. I began my letter thanking you for your investment in Intercontinental Exchange, and I end echoing that deep appreciation.