Intercontinental Exchange Inc. · NYSE:ICE
Intercontinental Exchange — Merger or Acquisition (May 2022)
39 slides from Intercontinental Exchange's merger presentation, May 5, 2022
Slide 1: ICE + Black Knight
ICE + Black Knight Strengthening the overall mortgage ecosystem for the benefit of all consumers May 5, 2022 1
Slide 2: GAAP and Non-GAAP Results
GAAP AND NON-GAAP RESULTS This presentation includes non-GAAP measures that exclude certain items we do not consider reflective of our cash operations and core business performance. We believe that the presentation of these non-GAAP measures provides investors with greater transparency and supplemen
Slide 3: Cautionary Statement Regarding Forward Looking Statements
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS This communication contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and
Slide 4: Important Additional Information and Where to Find It
IMPORTANT ADDITIONAL INFORMATION AND WHERE TO FIND IT ANT ADDITIONAL INFORMATION AND WHERE TO FIND IT In connection with the Transaction, ICE will file with the SEC a Registration Statement on Form S-4 to register the shares of ICE common stock to be issued in connection with the Transaction. The Re
Slide 5: Call Participants
Call Participants Jeff Sprecher Ben Jackson Warren Gardiner Joe Tyrrell Mary Caroline O'Neal Katia Gonzalez Chair & CEO President Chief Financial Officer President, Director, Investor Senior Analyst, Investor ICE Mortgage Technology Relations Relations 5
Slide 6: Transaction Overview
Transaction Overview ICE to acquire Black Knight • Creates a life-of-the-loan platform that will enable lenders to achieve a “customer for life” • Opportunity to remove additional friction and expense from the mortgage workflow, accruing to the Strategic benefit of all stakeholders, including the en
Slide 7: About Black Knight
Rev CAGR Strong Track Record of Growth About Black Knight +8% $1,475 $s in millions $1,239 $1,177 $1,114 Black Knight Overview $1,026 $1,052 46% ▪ A premier provider of integrated, mission-critical software solutions, 43% 45% 43% 45% 46% data and analytics helping customers realize efficiencies, red
Slide 8: Strategic Rationale
Strategic Rationale • Continued expansion of end-to-end capabilities creates a life-of-the-loan platform that will enable Life of Loan Platform lenders to achieve a “customer for life” • Unique data and analytics across the mortgage workflow present untapped opportunity to drive greater transparency
Slide 9: Mortgage Workflow Solutions
Life of Loan Platform Drives Efficiencies Across the Workflow Lead Processing, Home Closing & Secondary & Servicing & Generation & Underwriting, & Search Post-Closing Loan Trading Defaults Application Pre-Closing Mortgage Workflow Loan Origination, Closing, Funding, Invoicing, Claims, Marketing Call
Slide 10: Integration of Unique Data & Analytics Presents Untapped Opportunity
Integration of Unique Data & Analytics Presents Untapped Opportunity Integrating the data & technology across the loan origination and servicing workflows will reduce lender costs leading to end consumer savings • Expand presence into the home search process • More timely information will enhance th
Slide 11: Opportunities to Benefit the American Homebuyer
Opportunities to Benefit the American Homebuyer • Digitization and automation will reduce friction and help lower costs to originate for all parties, ultimately making getting a loan more affordable and accessible for future borrowers • Leveraging data across the mortgage workflow, lenders can help
Slide 12: Efficiencies Across the Workflow Underpin Expanded Opportunity
Efficiencies Across the Workflow Underpin Expanded Opportunity $14 billion Total Addressable Market Adds Servicing TAM of ~$2Bn ~$14 billion Total Addressable Market • Highly complementary to origination TAM; highly recurring revenue stream Application, Closing & Processing & • Integration of servic
Slide 13: Improve Visibility and Durability of Business Model
Improve Visibility and Durability of Business Model • Increases mix of high-growth recurring revenue • IMT recurring revenue mix increases to ~70% • Total ICE recurring revenue mix increases to ~55%+ • Adds a more stable revenue stream to our current origination-based revenues ICE Mortgage Technolog
Slide 14: Transaction Details and Assumptions
Transaction Details and Assumptions • Transaction valued at a market value of $13.1 billion or $85/share; enterprise value of ~$16 billion • Consideration to come in the form of $10.5 billion cash and ~$2.6 billion of stock based on ICE 10-day VWAP as Purchase Price of May 2, 2022 of $118.091 • Full
Slide 15: Strong Financial Outlook for Combined Company
Strong Financial Outlook for Combined Company Balanced Pro Forma With Less Exposure to Revenue Mix1 Mortgage Transactions1 Mortgage ~$8.6 billion Technology ’21 Pro-forma Revenue 30% Transaction 45% Exchanges 48% Recurring 55% ~$5.2 billion Fixed Income & ’21 Pro-forma Adj. EBITDA2 Data Services 22%
Slide 16: ICE's History of Evolution and Growth
ICE’s History of Evolution and Growth $5.15 $4.41 $3.79 $3.53 $2.93 $2.76 $2.42 $1.93 $1.68 $1.50 $1.38 $1.07 $0.83 $0.85 $0.68 $0.48 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 16 2013-2021 are adjusted figures which represent non-GAAP measures Please refer to sl
Slide 17: Appendix
Appendix 17
Slide 18: About ICE
About ICE 18
Slide 19: Overview
Overview ICE is a leading global provider of data services and technology solutions to a broad range of customers including financial institutions, corporations and government entities. By combining our world class technology with our data services and operating expertise, we add transparency and en
Slide 20: Two Decades of Innovation & Growth
Two Decades of Innovation & Growth Exchanges Fixed Income & Data Services Mortgage Technology Leveraging trading & With ICE’s fixed income clearing infrastructure, pricing & reference data ICE adds to its energy ICE acquires the New ICE expands its futures as a foundation, ICE futures network throug
Slide 21: A Leading Global Provider of Data and Technology
A Leading Global Provider of Data and Technology We design, build and operate digital networks across asset classes Exchanges Fixed Income & Data Mortgage Technology Exchanges across the major asset Electronification of the fixed income Digitization of the U.S. residential classes, including energy.
Slide 22: Consistent Growth and Value Creation
Consistent Growth and Value Creation $s in millions Total Revenue Recurring Revenues 18% $7,146 CAGR 49% $4,512 $1,327 9% 2011 2016 2021 2011 2021 $s in millions Free Cash Flow1 Adj. EPS1 16% $5.15 $2,821 14% CAGR CAGR $1,769 $2.76 $1.38 $625 2011 2016 2021 2011 2016 2021 22 (1) 2013-2021 adjusted f
Slide 23: Strong Capital Return
Strong Capital Return Ellie Mae acquired in Capital Return Philosophy 2020 $2,081 $1,916 $1,753 Dividend Growth ▪ Grow the dividend as the company grows $1,425 ▪ Double-digit increase on avg. since 2013; 1Q22 $1,460 dividend +15% y/y $1,247 $1,198 $991 $997 $944 $949 Share Repurchases $250 $693 IDC
Slide 24: Proven Track Record of Deleveraging Following Acquisitions
Proven Track Record of Deleveraging Following Acquisitions • History of realizing synergies on or ahead of schedule • Demonstrated ability to efficiently and effectively integrate acquisitions while growing core business • Proven record of driving further growth and generating premium value for all
Slide 25: ICE Mortgage Technology Overview
ICE Mortgage Technology Overview 25
Slide 26: Overview of IMT Products and Revenue Model
Overview of IMT Products and Revenue Model Product Description Revenue Model ▪ All-in-one SaaS-based mortgage management system providing workflow management and vendor connectivity Encompass Origination ▪ ▪ ▪ Primarily “success-based pricing” equal to: System Processing Secondary Marketing and Trad
Slide 27: Overview of Black Knight Products and Revenue Model
Overview of Black Knight Products and Revenue Model Product Description Revenue Model ▪ Servicing Software provides core solutions that automate loan servicing Servicing • Software Largely subscription-based revenues based on number of loans serviced ▪ Loan Setup ▪ Accounting • The greater of a mini
Slide 28: Mortgage and Housing Market Data
Mortgage and Housing Market Data 28
Slide 29: Home Ownership Remarkably Consistent Over the Long Term
Home Ownership Remarkably Consistent Over the Long Term in millions Total U.S. Housing Stock 140 • Steady and consistent expansion over the longer term 130 • Housing stock has more than doubled since 1970, growing roughly in 120 line with population 110 • Declines in homes for sale per capita over t
Slide 30: The Millennial Generation is Approaching an Inflection Point in Homeownership
The Millennial Generation is Approaching an Inflection Point in Homeownership • Homeownership rate consistently increases with age, with a 30% increase between 29 and 44 years • The largest generational cohort centers around ~30 years old (millennial generation) • Demand for home ownership is projec
Slide 31: Historical and Projected Purchase Originations
Historical and Projected Purchase Originations Are a Long-Term Indicator of Favorable Housing and Mortgage Finance Trends • Purchase origination volumes reflect the overall direction of the mortgage finance market, rising consistently as housing stock expands and younger generations become homeowner
Slide 32: Mortgage Debt Outstanding Mirrors Growth in Housing Stock
Mortgage Debt Outstanding Mirrors Growth in Housing Stock and a Proliferation of the Mortgage Product • Black Knight’s servicing revenue is largely driven by loan count with limited exposure to origination volumes • Servicing solutions provide a consistent foundation and partial mitigant to natural
Slide 33: Increasing Cost to Originate a Loan
Increasing Cost to Originate a Loan Existing Industry Costs Largely Personnel-Related Loan Origination Costs Rising In $US Other Expenses ~$9,000/loan 20% Technology Services Targeted customer 3% ~$2,600+ savings on IMT platform Occupancy & Equipment Personnel 4% 73% ~$4,000/loan 2009 2021 33 Source
Slide 34: Extensive Regulatory Oversight Driving Increased Costs
Extensive Regulatory Oversight Driving Increased Costs Calculation of Annual Percentage Rate (APR) Alerts for RESPA Tolerance Violations RESPA - Reg X Calculation of Amount Financed / Finance Charge Amount / Total Payments / Total Generate GFE, Settlement Providers and HUD-1 Disclosures Truth In Len
Slide 35: Non-GAAP Reconciliations
Non-GAAP Reconciliations 35
Slide 36: Black Knight Adjusted EBITDA Reconciliation
Black Knight Adjusted EBITDA Reconciliation in millions 2016 2017 2018 2019 2020 2021 Net earnings $133 $ 254 $169 $109 $264 $208 Depreciation and amortization 208 207 217 236 271 365 Interest expense, net 68 58 52 64 63 84 Income tax expense (benefit) 26 (62) 38 42 42 36 Other expense (income), net
Slide 37: Adjusted Net Income & EPS
Adjusted Net Income & EPS Twelve Months Twelve Months Ended Ended in millions 12/31/2021 12/31/2020 Net income attributable to ICE common stockholders $ 4,058 $ 2,089 Add: Amortization of acquisition-related intangibles 622 388 Add: Transaction and integration costs and acquisition-related success f
Slide 38: Adjusted Net Income & EPS
Adjusted Net Income & EPS Twelve Months Twelve Months Twelve Months Twelve Months Twelve Months Twelve Months Twelve Months in millions except per share amounts Ended 12/31/19 Ended 12/31/18 Ended 12/31/17 Ended 12/31/16 Ended 12/31/15 Ended 12/31/14 Ended 12/31/13 Net income attributable to ICE $1,
Slide 39: Free Cash Flow Calculation
Free Cash Flow Calculation Twelve Months Twelve Months Twelve Months in millions Ended 12/31/2021 Ended 12/31/2016 Ended 12/31/2011 Cash flow from operations $3,123 $2,149 $713 Less: Capital expenditures and capitalized software development costs (452) (365) (88) Add/(Less): Section 31 fees, net 150
Intercontinental Exchange — Merger or Acquisition (May 2022) on 6ix