Good morning. My name is Andrea and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Intercontinental Exchange Third Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. Mr. Gardiner, you may begin your conference.

Thank you. Good morning. ICE's third quarter 2020 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 2019 Form 10-K, third quarter Form 10-Q and other filings with the SEC.

Thanks, Warren. Good morning, everyone. And thank you for joining us today. I'll begin on Slide 4 with some year-to-date and third quarter highlights. Through the first nine months of 2020, we've generated record revenues, record adjusted operating income and record adjusted earnings per share, all of which have grown double-digit over a record year in 2019. This business performance allowed us to return $1.7 million of capital to our shareholders, 10% more than in the prior year. Importantly, our solid financial position enabled us to invest $11 million to extend our mortgage network through the acquisition of Ellie Mae. For the third quarter, we generated earnings per share of $1.03 on net revenues of $1.4 billion. Data services revenue grew to a record $589 million, an increase of 6% versus the prior year. Trading and Clearing revenues totaled $711 million. Of note, our total mortgage revenue in the third quarter grew 62% on a pro forma basis versus the third quarter a year ago, while ICE's total net revenues pro forma for Ellie Mae grew 7% year-over-year. Third quarter adjusted operating expenses totaled $611 million, including $29 million related to Ellie Mae. Total expenses would have been roughly $7 million higher if not for some credits we don’t expect to repeat in subsequent quarters. As we move into the fourth quarter, we expect marketing expenses to accelerate related to a robust IPO pipeline and the launch of our mobile consumer finance app. Combined with a full quarter of Ellie, which we expect will contribute around $105 million to $110 million, we expect fourth quarter adjusted operating expenses to be in the range of $695 million to $705 million.

Thank you, Scott and good morning to everyone on the call. As I begin, I'd like to welcome the Ellie Mae team to their first ICE earnings call. While it's been less than two months since we closed on the acquisition in early September, I've been impressed by the collaboration between our teams during this short time and I am confident that the integration of Ellie Mae is off to a very strong start. I believe this is a testament to the talent of our respected employee population and our shared entrepreneurial cultures. Similar to our exchanges in fixed income businesses, Ellie Mae integrated into ICE Mortgage Technology as a network that thrives by offering a value proposition that aligns growth with the efficiency gains that we bring to our customers. As we've seen across our network in futures, equity, and fixed income, these efficiency gains are best achieved through harnessing unstructured data to create mission-critical information, seamlessly linking participants to that information and ensuring that the network technology underpinnings are of the highest quality and security. It is the execution of this value proposition that often propels the analog to digital conversion of an industry, and it's a blueprint that we've applied across all of our businesses for over two decades. Turning now to Slide 7, open interest in our global energy business is currently up 9% year-over-year, and with average daily volume in our flagship Brent crude oil contracts up 4% through September, energy revenues in total are up 15%. This growth further contributed to our average annual revenue growth of over 7% since 2015, which is a direct result of staying close to our customers, understanding their evolving essential needs, and expanding the breadth of the content that we offer across our energy network.

Good morning, Jeff and good morning, Scott. I guess given your acquisition of Ellie Mae, you have a much more diverse business as you've grown fixed income. On a sum of the parts basis, the stock looks inexpensive to us anyway, so my questions are, why haven't you chosen to break it out? And I guess Scott did sort of address, you're still looking at how to report the segment results. But more importantly, are you concerned over the valuation versus sum of the parts? And how patient will you be over time? I know you just acquired Ellie Mae, but how are you thinking about the sum of the parts given your diversity here now?

Thanks for the question, Rich. So the first thing we're thinking, as Scott mentioned and you alluded to, is that we're going to do a better job now of presentation so that you and our investors have visibility into how we're thinking about and running our business. As you know, we run network businesses, and we run businesses and look for opportunities where the next customer or the next product on that network becomes additive to everyone on the network and continues to compound revenue and earnings growth across that network as a result. And so we're feeling really good right now. If you look at our commodity business, futures business, open interest is up 9% year-over-year, when the markets are in contango, that's normally a signal or precursor to volume and revenue growth in the future. So we're very, very happy with the way that business is performing. If you look at our fixed income and data business, you see that ASP, which is the future indicator of business, is accelerating and compounding. As we've indicated to you, if you look at our new mortgage network, which we're still combining with our other assets, it's showing double-digit growth both in subscriptions and in transactions, revenue growth, and earnings growth for us in those businesses. So all of the segments that we're going to be showing you beginning in the fourth quarter are well positioned for 2021. I just want to reiterate that this management team has a mentality that our job is to deliver EPS growth where we normally find that the stock will catch up to that growth.

And just interesting is that price eventually catches up its value, as demonstrated every share we've ever bought back in our repurchase program. A year later, it has been worth 20% more, and two years later, it's been worth 40% to 50% more. And so it does catch up. I do think that the new segments will help. As I mentioned in my prepared remarks, we intend in early December to give you all some history regarding how those segments will look back from 2018 and 2019, year-to-date. So that you'll have that information in early December.

Hey, good morning, everyone. Just a quick one on the mortgage side. First of all, I think Ellie came in better than your initial expectations. I know it's a small number; it was only a month, but also 4Q looks pretty robust. So just curious about the near-term outlook. What are you seeing? Related to that, I think the Mortgage Bankers Association recently revised their forecasts for activity for next year. So just curious if you're starting to get more comfortable or bullish on the outlook for next year that you've laid out. I know it's early days, but just curious about your latest thoughts?

Hey Alex, it's Ben. I'll take that. So a couple of things I'll share with you. It's only been a couple of months since we've closed on the business. But a couple of interesting things to share with the group are, number one, I'll share just on the integration front that we've made a ton of progress on pulling together our mortgage assets. So the Simplifile business, the merge business, and Ellie Mae we've been able to pull those businesses together to operate as one very quickly. What enabled us to do that was that we knew the Ellie Mae business very well prior to doing this transaction because we had a long-term partnership with them with Simplifile. So we had a good view on what we were going to do; we got to a room quickly in September, we were able to make the decisions that needed to be made to get the business organized currently, have made all those decisions, announce them to all the teams, and now we're executing against the single vision and single strategy. Two other evidence points I'll give you are that it's well-publicized that volumes are strong. Rates are low, Millennials are buying; you're seeing people purchasing new homes to get more space to get a pool, transitioning out of cities into suburbs. We see all that kind of mix. One of the interesting things that not many people appreciate around Ellie Mae is we also have a bit of a forward view on what's happening in that space because we're in the origination space. We see applications for refinances or new home purchases 60-plus days earlier than the rest of the market. The volumetric aspect of the business continues to be strong, confirming our view going into this transaction on the opportunity with this business. The third thing I'd point to and the most important thing, and Jeff just touched on it; I think the key to look at is our subscription sales results. We modeled a view as to where sales of new Encompass seats would be, sales of their artificial intelligence engine called AIQ that's going after the analytics TAM identified in this space. In the last couple of weeks, the business has already hit, the subscription sales numbers where we thought they would end the year. That is important because as we're hitting those sales results, it helps to firm our view on what we assumed market share growth would be. The team is continuing to gain market share, more customers, more users, and more recurring revenue coming onto the platform. It's a stronger network and all of this pulls through additional volume. So everything we've seen in the two months of owning the business has firmed our original views.

Good morning, and thanks for taking the question. One more on Ellie Mae, given that close and doing more work in the area, can you provide maybe an update on the growth opportunities? More importantly, can you apply the different components of revenue growth? You obviously have the volume component but also the adoption, and given the latter, you get more credit in terms of valuation over time. Any other factors or opportunities that you're seeing as you do more work in that area of the market?

Hi, Mike, it’s Ben. I'll take this one as well. Thank you for your question. There are a whole bunch of different opportunities for growth in this business, which is what gave us conviction that this business can grow through any volume environment that we see. We've identified that there's a $4 billion TAM in just origination and processing. We're obviously very well positioned there; our business is touching almost 50% of U.S. mortgages that are coming through the process, refinancing, and purchases. The second thing in that origination and processing TAM is our network. Our business here has the largest mortgage network in the U.S., interconnecting hundreds of service providers to lenders. The benefits that lenders themselves can receive from utilizing and buying services from those third-party providers over our network are significant, and that connectivity exists. However, that network remains underutilized. The other way of ordering the services outside of the network is that you have to manually select vendors, procure the information, and you’ll get back scanned documents, PDFs, with data that are difficult to manage. Today, vendors are really starting to see the benefits of ordering services off our network. For the benefits we're providing to the lenders, we receive a revenue share for that. The second piece is the analytics side, which we've identified as another $4 billion TAM. In the year 2020, studies have shown that at least $5,200 of the average $8,000 origination fee is just manual processing, while technology costs are under $500. We're capturing this opportunity; AIQ sales have already picked up from our existing customer base. Those are two new areas that I'd emphasize as significant growth opportunities for this business.

Hi, good morning, and thanks for taking my question. It looks like we're seeing further pressure to migrate away from LIBOR in the U.S. Can you remind us if there's any impact on this transition away from LIBOR in terms of data revenue and benchmark service revenue? Can you discuss the transition to SONIA in terms of trading in Europe? Are there opportunities in this transition to either grow trading or grow data, or should we expect this to be a swap from LIBOR?

It's a good question. We're in the middle of a transition, and there's some uncertainty as to timing. As you pointed out, regulators are pushing for this transition, but many underlying business issues still need to be dealt with. The sale of LIBOR as an index for us is minimal, and the question is how long LIBOR may survive after the industry moves to SONIA to pick up legacy business. Our market share in trading SONIA has accelerated, and we probably have over 70% of the market share of all trading in SONIA. Thus, we feel very confident with our trading activities to provide a bridge, and if both survive side by side for some time, we'll be a net beneficiary of that as well.

Ken, historically, as you've seen transitions from one contract definition to another, the impact tends to be a decline in trading of the old as everyone moves to the new. The good news for us is that interest rates only make up about 4% of our revenue. So it's a relatively small impact overall.

Hey, thanks. Just a follow-up to Mike's earlier question around the mortgage TAM and growth. Ben, you gave some really good insights around the opportunity to capture TAM from your end-to-end suite of solutions now that Ellie is part of the business. Are there additional white spaces that you'd like to fill in mortgage land either to build organically or bolt on inorganically to make the holistic solution more compelling? Any thoughts on these additional properties out there?

Thanks, Jeremy. We feel good about our position with the assets we have. Our network touches every single part of the origination process and closing. From the consumer's point of view, it starts with research to engagement with the lender, automating the document processes, and finalizing the closing. We have all the right pieces. Much of the work of pulling the networks together has already been underway for quite some time. While we've made rapid integration progress, we see valuable bolt-on opportunities that can be valuable growth accelerants, which we would evaluate as appropriate.

Hey, good morning. My question is on the data business, which came in above your guidance. You talked about trends in your prepared remarks, but I'd like you to expand on where the strength is coming from and you've historically looked at longer periods for the outlook. So maybe give us a look into next year regarding that business?

Sure, thanks for the question, Dan. The beat in the quarter came from a couple of things clearly. As I mentioned in my prepared remarks, the SIP revenues related to significant retail activity in the cash equities markets contributed to that. The pricing and analytics business has been exceptional as our sales team has held productivity levels comparable to the previous year despite limitations on travel. They're on track to achieve around 98% or 99% of their signing objectives. The growth has accelerated each quarter, and it's slated to grow around 6% in the fourth quarter. We feel very good about this business not just in the fourth quarter but also in 2021.

Hey, good morning, everyone. Ben, I guess just another one on the mortgage tech business. The deal clearly makes sense for the growth profile with structural tailwinds. But some larger competitors have also talked about the strength of their digital capabilities and network effects. We hope you can talk a bit about specific areas where you're differentiated versus larger players.

Sure, thank you for that. One of the major differentiators is our industry positioning. Our network touches virtually every aspect from origination to closing. Comparatively, we hold about 50% market share through cyclical processes. With our partnerships and proven technology, we are driving forward both our origination processes and our closing structures efficiently. Additionally, we uniquely possess a repository of detailed settlement requirements that offer tremendous insight into market practices. This data provides ongoing advantages in ensuring we streamline processes and minimize errors.

This is Jeff, and one of the things we really liked about this business is that we've opened our network, and many competitors use our services to offer their own. Because our network is comprehensive and open, entities at different stages can collaborate, allowing us to benefit from industry growth in a cooperative manner. Our focus remains on increasing our earnings per share, not entirely on outperforming every competitor.

Great, thanks. Good morning, folks. A quick cleanup on the tax rate outlook for 4Q, and then a question on the mortgage business. Scott, can you reiterate the 8% to 10% growth on the Ellie Mae business stated in the past for 2021, even with the refinancing headwinds? More importantly, how should we view organic growth from existing customers using the network?

The tax rate will be in the 22% to 24% range, which has been consistent for the year, aside from the third quarter when we had to revert the U.K. back to 19%. We would expect the fourth quarter to revert to where we began the year. In terms of Ellie Mae, we emphasized that it's a business that could grow 8% to 10% per decade. We're investing to spur growth without hampering bottom-line results; we stand by our positive outlook for next year.

Great, thanks. Good morning, everybody. I was hoping we could discuss your credit trading business, which you mentioned might integrate fully with ETF Hub and acquired trading venues. What's the overall revenue contribution, and how do you see that evolving over the next twelve months since you made some investments there?

As Scott had mentioned earlier about our re-segmenting plans we'll provide more color on revenue aspects in the first half of December. Just to give you a flavor of our ongoing strides in the institutional space: The strategy has three main legs. First is the automation of complicated manual workflows. Second is the launch of ICE Select, an aggregation engine bringing together trading protocols. Lastly, we've connected ICE Select to ETF Hub, seeing significant market maker participation and activity, leading to successful procurements recently. We're beginning to see tangible growth from these integrations.

There are no further questions at this time. Mr. Sprecher, I turn the call back over to you.

Thank you, Andrea, for moderating and thank all of you for joining us this morning. We look forward to speaking to you again soon. In the meantime, I hope that you and your loved ones stay safe and stay healthy. With that, I hope you have a great day. Thank you.

This concludes today’s conference call. You may now disconnect.