2023 Letter to Shareholders

Let’s begin with key aspects of ICE’s financial performance in 2023.

During 2023, I’m proud to share that we generated record net revenues¹, record adjusted operating income², and record adjusted earnings per share². Our net revenues¹ totaled $8.0 billion, up 10% from 2022, underpinned by our strategic positioning of ICE at the center of some of the world’s largest industries undergoing analog to digital conversions.

• In our Exchanges segment, which includes our futures network as well as the New York Stock Exchange, net revenues increased 9% year-over-year to a record $4.4 billion. Cleaner energy sources, including global natural gas and environmental products, make up over 40% of our energy revenues and have grown 17% on average over the past five years. This strong performance also contributed to 29% growth in energy revenues in 2023.

• In our Fixed Income and Data Services segment, we generated record total revenues of $2.2 billion, up 7% year-over-year. Our continued efforts to build connectivity across our platform drove another year of record revenues in our ICE Bonds business, up 23% in 2023, on top of a nearly 100% increase in 2022.

• In our Mortgage Technology segment, revenues were $1.3 billion. As we enter 2024, we remain focused on the successful integration of Black Knight and executing on our strategy to relieve the pain points and inefficiencies that exist across the mortgage workflow.

On a consolidated basis, ICE’s adjusted operating income² for the year was $4.7 billion, up 9% year-over-year, and our adjusted operating margin² was 59%. Adjusted free cash flow² was $3.2 billion, which enabled us to return nearly $1.0 billion to shareholders through dividends in 2023, while continuing to make strategic investments across our businesses. Finally, we increased our quarterly dividend by 7% to $0.45 per share beginning in the first quarter of 2024.

Looking back at the last year, 2023 was a challenging period for market participants. Increasingly, customers turned to ICE for the tools they needed to enable price discovery and manage allocation of capital.

With trade dynamics becoming increasingly complex, market participants not only sought liquidity in the major global benchmarks, but also in products that provide for greater precision in hedging their positions. In the more than 20 years ICE has been building its global energy platform, we have created hundreds of precise hedging instruments for our customers, all of which are underpinned by the deep liquidity in our global energy benchmarks, such as ICE Brent, Gasoil, Dubai (Platts) and TTF.

Oil markets grew at pace in 2023, with Brent crude again finishing the year as the largest and most traded oil contract in the world. The Brent story itself is a fascinating one; once just a small index based on four deepwater oil platforms built in the 1970s in the North Sea between Scotland and Norway, and now becoming the benchmark for global energy.

The addition last year of Midland WTI as a deliverable crude grade into the ICE Brent basket created new Midland exposure for markets to manage. Our Midland WTI contract, known as HOU, is now delivering over 4.5 million barrels of Midland-quality crude each month, fast becoming the most accurate representation of the Houston oil market.

In the Middle East, Murban and Dubai crude trading reached new highs, as customers found value in the markets that we worked with them to create. That work puts ICE in a unique position to meet customer demand for more precise hedging tools given their correlation to Brent.

An example of how we meet customer needs is our evolution of our Gasoil futures contract to deliver Russian origin-free product as part of our extensive energy offering. As the benchmark for refined products, open interest in Gasoil is exceeding levels that existed prior to Ukraine’s conflict with Russia.

Within our natural gas portfolio, against a backdrop of Australian LNG plant strikes, Norwegian pipeline maintenance issues, and the continuation of an artificial price “cap” on EU gas, our European natural gas benchmark, called TTF, saw record performance across liquidity metrics as participation, volume and open interest grew significantly.

In global markets, the ways in which energy is produced and consumed are rapidly shifting. As this evolution introduces new complexities and uncertainties, ICE’s environmental products work alongside our broad array of energy contracts, helping participants navigate this progression, reaching $1 trillion in notional value for the third year in a row in 2023, while our North American environmental suite hit record traded volume. Importantly, we continue to evolve alongside this trend, exemplified by our recent launches of a CORSIA futures contract to manage exposure from airline emissions, along with Washington Carbon Allowances, which is part of our fifth carbon cap-and-trade program.

In addition, agricultural markets saw high activity throughout the year, with extreme weather related to El Niño touching all parts of the commodity supply chain. ICE’s soft commodities, including cocoa and coffee, hit a series of volume and open interest records over the year, while our U.S. sugar contract made its largest delivery on record.

In interest rates, a U.S. regional banking crisis sparked contagion fears at the start of 2023, testing banking sector reforms enacted after the global financial crisis of 2008. At the same time, central bank monetary policies drove interest rates to highs not seen in decades as they tried to tame inflation. As a result, customers increased hedging activity with ICE’s Euribor and SONIA contracts, the most liquid benchmarks for European and U.K. rates respectively. In March, Euribor hit the highest trading volumes in ten years, with records continuing throughout the year, while SONIA hit record average daily volume in 2023, underscoring their deep liquidity and diverse global participant base.

Our equity markets experienced another strong year in terms of trading volumes, given the changing economic conditions and geopolitical uncertainty. These trends resulted in a relatively muted year for initial public offerings. Nevertheless, the New York Stock Exchange led the industry in listing transfers for the second year in a row, highlighting the unparalleled value that an NYSE listing offers.

Throughout the year, the momentum evident inside the iconic NYSE building at 11 Wall Street made headlines every month. From visits by world leaders, government officials, entrepreneurs and Fortune 500 CEOs, our role as steward of the world’s capital markets was consistently highlighted. 

Behind the scenes, 2023 also marked completion of the multi-year rollout of our state-of-the-art trading platform, NYSE Pillar, bringing all our NYSE equity and options markets onto one of the world’s most powerful and resilient technology stacks. This is particularly noteworthy, as we have seen systemwide message volume consistently climb to record levels, now exceeding a peak of more than 600 billion messages in a single day. 

Continued strong retail interest in passive investing, higher interest rates, and an industry shifting from voice-brokered trading to digital markets laid the foundation for record growth in our fixed income execution and credit default swap clearing businesses.

ICE Bonds, our trading platform for corporate, government, agency, and municipal bonds, had another year of record performance in revenue and trading volume. Along with macroeconomic factors, our ICE Bonds business benefited from growing retail demand for bonds as investors took advantage of higher interest rates, an expansion of our network of liquidity providers and investors, and strong growth in automated trading activity from our growing base of institutional customers.

ICE Indices has proven to be another key growth area for our company. As a growing number of mutual funds have converted to bond Exchange Traded Funds, or ETFs, we’ve seen a large increase in the use of ICE benchmarks across the highly competitive funds landscape. Last year, 44 new passively-managed ETFs benchmarked to our indices, adding over $3 billion in assets under management, or AUM. In addition, $28 billion in AUM transitioned to our indices from other index providers. This growth helped drive AUM benchmarked to our indices to a record $573 billion at the end of 2023.

As market structures continue to evolve, we have worked with customers to offer the lowest-latency connectivity to the most active trading venues around the world through our ICE Global Network and Consolidated Feeds services. Last year, we further expanded to offer ultra-low latency data between the U.S. and Europe, including London, Frankfurt and Bergamo, Italy.

We were also pleased that the ICE Global Network was selected by the Abu Dhabi Securities Exchange (ADX) to offer direct market access to global institutional investors. This marked the first initiative of its kind for a financial market in the Middle East, and helped further ICE’s mission of connecting investors with marketplaces and opportunities. 

In 2023, no other sector felt the impact of the Fed’s ‘higher-for-longer-stance’ on interest rates more acutely than the U.S. housing market. Periods of uncertainty can be a productive time to apply fresh eyes to reimagine processes and ICE is on a mission to make the path to homeownership as fast, accessible, and as simple as possible. It’s readily apparent that the technology driving real estate and housing finance is overdue for modernization. Consumers expect – and receive – a much better experience from even the most mundane transactions in their day-to-day lives than when they take out a mortgage. They deserve at least as much when buying a home.

Our acquisition of Black Knight in September paved the way to completing a bridge. We added real estate solutions on the front end, mortgage servicing on the back end, and gained robust loan, borrower, and property data that runs throughout the homeownership lifecycle.

Last year, we continued to add new clients to our Encompass digital lending platform, including J.P. Morgan Chase and others, while also deepening relationships with our longstanding accounts as part of client renewals. In fact, sales of both our Encompass lending software and our MSP loan servicing system had their best year since 2018.

The mortgage industry is primed for transformation, and I’m proud to say we have assembled the team and the platform to realize that vision. Moving forward, ICE Mortgage Technology is spring-loaded for growth – as are our clients – as the housing market normalizes in 2024 and beyond.

With each year, ICE continues to build on our sustainability initiatives and identify new opportunities across our business to create long-term value and better serve our shareholders, employees and other stakeholders. Human capital management, risk management and environmental risks and opportunities are the areas we most focus on. For a comprehensive overview of our efforts, I encourage you to read our eighth annual corporate responsibility report, which can be found on our website at www.ice.com/esg.

As we move through the new fiscal year, the depth and breadth of our services have never been more relevant. Whether lighting a home, purchasing a property, or using our data and networks to grow a business, ICE’s technology and markets have proven to be indispensable elements.

At ICE, we believe that making the connection between people and opportunity should never be taken for granted. Our focus on creating shareholder value has, likewise, never been greater.

I’d like to share my heartfelt appreciation for your continued support of Intercontinental Exchange.