Earnings Call Transcript - ICE Q3 2021

Operator, Operator

Good morning, and welcome to the Intercontinental Exchange Third Quarter 2021 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, the participants are being recorded. I would now like to turn the conference over to Mary Caroline O'Neal, Head of Investor Relations. Please go ahead.

Mary Caroline O'Neal, Head of Investor Relations

Good morning. ICE's third quarter 2021 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 2020 Form 10-K, third quarter Form 10-Q 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 the 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, Chairman and CEO; Warren Gardiner, Chief Financial Officer; Ben Jackson, President; and Lynn Martin, President of Fixed Income and Data Services. I'll now turn the call over to Warren.

Warren Gardiner, Chief Financial Officer

Thanks, MC. Good morning, everyone, and thank you for joining us today. I'll begin on Slide 4 with some of the key highlights from our third quarter results. Adjusted earnings per share totaled $1.30, up 34% year-over-year, marking the best third quarter in our company's history. Net revenues totaled a record $1.8 billion, and on a pro forma basis, increased 11% versus last year, with all three of our business segments contributing to the strong year-over-year growth. Total transaction revenues grew 13%, while total recurring revenues, which accounted for nearly half of our business, increased by 10%. Third quarter adjusted operating expenses totaled $755 million, including $35 million related to Bakkt, which after successfully completing its merger with Victory Park recently began trading on the NYSE. Adjusting for Bakkt, third quarter operating expenses would have been $720 million, in the middle of our guidance range, while our adjusted operating margin would have been 60%, up over 100 basis points year-over-year. Looking to the fourth quarter, we expect adjusted operating expenses to be between $737 million to $747 million. Relative to the full year outlook provided on our second quarter call, the fourth quarter is now expected to include approximately $10 million related to Bakkt's sub period and $10 million to $15 million of performance-related compensation as we expect to reward our employees for their contribution to the strong results we are once again on track to achieve in 2021. Record year-to-date free cash flow has totaled nearly $2 billion. These strong cash flows along with the divestment of our $1.2 billion stake in Coinbase has enabled us to reduce leverage to under 3.25 times at the end of September, nearly a full year ahead of schedule. As a result, we expect to resume share repurchases, including up to $250 million in this year's fourth quarter. We anticipate updating you on our 2022 capital return plans early next year. In addition, we announced in October that we have agreed to sell our stake in Euroclear for €709 million, or approximately $820 million. We expect to determine the use of Euroclear proceeds as we approach closing, which we expect will occur in 2022. Now let's move to Slide 5, where I'll provide an overview of the performance of our Exchange segment. Third quarter net revenues totaled $959 million, an increase of 16% year-over-year. This strong performance was driven by a 30% increase in our interest rate business and a 38% increase in our energy revenues, including a 34% increase in our oil complex, a 73% increase in European natural gas revenues, and a 72% increase in revenues related to global environmental products. Importantly, total open interest, which we believe to be the best indicator of long-term growth, is up 18% versus the end of last year, including 11% growth in energy and 28% growth across our financial futures and options complex. Recurring revenues, which include our exchange data services and NYSE listings increased 6% year-over-year, including 10% growth in our Listings business. This acceleration in growth was driven by an increasing number of operating company IPOs choosing the NYSE, particularly in the technology and consumer sectors. Looking to the fourth quarter, we expect recurring revenues in our Exchange segment to be between $330 million and $335 million. Turning now to Slide 6. I'll discuss our Fixed Income and Data Services segment. Third quarter revenues totaled $477 million, a 6% increase versus a year ago. Recurring revenue growth, which accounted for nearly 90% of segment revenues, also grew 6% in the quarter. Within recurring revenues, our fixed income data and analytics business increased by 5% year-over-year, including another double-digit growth in our index franchise, while other data and network services grew 9%, driven by continued customer demand for additional network capacity. Looking to the fourth quarter, we expect that our recurring revenues will improve sequentially to a range of $415 million to $420 million, and that full year revenue growth will be approximately 6%, at the high end of our guidance range. Let's go next to Slide 7, where I will discuss our Mortgage Technology segment. Please note that my comments on revenue growth are on a pro forma basis. Despite a double-digit decline in industry origination volumes, our mortgage technology business grew 7% year-over-year and achieved record revenues of $366 million. While third quarter transaction revenues declined slightly, they were more than offset by a 33% growth in our recurring revenues, which at $143 million once again exceeded the high end of our guidance range and accounted for nearly 40% of total segment revenues. Our outperformance relative to industry trends continues to be driven by increased customer adoption of digital tools across the workflow. While these secular growth trends have been a clear tailwind for our recurring revenues, there is also opportunity to drive accelerating adoption across our transaction-based businesses, such as our Closing Solutions, where revenue increased by 30% in the third quarter. Looking to the fourth quarter guidance, we expect that recurring revenues will once again grow sequentially and be in a range of $147 million to $152 million. At the midpoint, this represents growth of approximately 25% year-over-year, which is on top of 20% growth achieved in last year's third quarter. In summary, we once again had strong contributions from each of our businesses and across the asset classes in which we operate. We delivered double-digit growth in revenue, operating income, and earnings per share. We also generated strong cash flows, reduced leverage to under 3.25 times, announced the divestment of our stake in Euroclear, and successfully returned public on the NYSE. As we look to the end of the year into 2022, we remain focused on meeting the needs of our customers, continuing to drive growth and create value for our shareholders. I'll now turn the call over to Ben.

Ben Jackson, President

Thank you, Warren, and thank you all for joining us this morning. Please turn to Slide 8. Our strong third quarter results were driven in part by interest rate volatility, global energy supply shortages and the continued adoption of our mortgage technology even amidst a decline in origination volumes. But more importantly, underpinning that performance are long-term secular tailwinds that will continue to drive growth across asset classes in macroeconomic environments. And with data and technology at our core, we have strategically positioned the business to benefit from these tailwinds across our platform. In energy, the globalization of natural gas and the evolution to cleaner energy are trends that we began investing in over a decade ago. And today, cleaner energy sources, including global natural gas and environmentals, make up approximately 40% of our energy revenues and have grown 12% on average over the past five years. With the rise of LNG, natural gas markets are becoming more global in nature. In our European gas benchmark, TTF is emerging as the global gas benchmark. Revenues in our TTF markets have grown 38% on average over the last five years, including 84% growth in the third quarter. The supply shortages and price volatility that we saw in the third quarter are a peek into the future of what the energy transition could look like. Energy consumption is expected to double over the next 30 years, yet carbon emissions are expected to be reduced by half. This imbalance in supply and demand will introduce additional complexity and volatility to energy markets, which will drive greater demand for our risk management. Our global environmental markets, alongside our global oil, gas, and power markets provide the critical price transparency across the energy spectrum that will enable participants to navigate this evolution. Complementary addition to the risk management that our technology provides is our growing suite of associated data products. Leveraging our leading environmental markets, we built a suite of carbon indices, which allow global investors to access market-based carbon prices through a single investment instrument. And today, there are a growing number of ETFs benchmarking to our carbon indices and environmental markets. Turning now to fixed income. The electronification of fixed income is a data-driven trend. We recognized this in 2015 when we acquired IDC and continue to invest and innovate in data and technology to further enable this trend. Our leading evaluated prices provide critical price transparency for nearly 3 million securities daily. By combining our proprietary pricing data with our comprehensive reference data, we've built innovative tools and analytics that will facilitate the continued electronification and automation of the fixed income markets. Solutions like our continuous evaluated pricing, best execution, and liquidity indicators, for example, provide pre-trade transparency needed to determine fair value. We also see the electronification of fixed income within the ETF ecosystem. Our quality pricing and reference data, combined with four years of history serve as the foundation of our growing index business. We not only offer benchmark indices but also calculation services, analytics, and unique solutions like our custom indexes. By servicing the entire ETF ecosystem through data and technology, we've been able to grow our index business double digits for the past four years. And finally, turning to our mortgage business. In the third quarter, we were once again able to grow our revenues even with industry volumes down double digits. This continued outperformance is a result of executing against our strategy of leveraging our mission-critical technology and data expertise to accelerate the analog-to-digital conversion happening in the industry. Part of that strategy is intentionally shifting more business to recurring revenue, particularly within our origination technology and data and analytics business. While we only recently began this transition, we've already seen strong client adoption. Another opportunity that we’re executing on today is in our closing solutions. The demand for automation in the closing of a real estate transaction is increasing. We see this evidenced by the continued onboarding of new customers to our electronic closing room, and hybrid solution that we launched in the second quarter. This month, we further advanced the automation of our eClose solution, which can save lenders hundreds of dollars per loan by leveraging additional technology and automation by adding eNote and eVaults. Our comprehensive offering and the efficiencies that it delivers, positions us well to execute on what we believe to be a $1 billion opportunity. Within Data and Analytics, our AIQ solution leverages AI, machine learning, and proprietary data from our origination platform to automate the steps in the loan manufacturing process. This automation could save lenders thousands of dollars per loan by reducing manufacturing time and complexity. Today, only a fraction of mortgage technology customers take our AIQ solution, and we continue to have strong sales success cross-selling to existing customers even if they're not on our loan origination system, including one of the largest depositories in the US. And while still an early opportunity at under $100 million in revenue today, the efficiencies that our data analytics provide position us well to continue executing against what we think is a $4 billion opportunity. Flywheel effect that our leading technology and data provides combined with the cross-sell that our broad connectivity offers generates an array of opportunities for us to grow a business that at $1.4 billion today is only a fraction of the $10 billion opportunity. I'll now turn the call over to Jeff.

Jeff Sprecher, Chairman and CEO

Thank you, Ben, and thank you all for joining us this morning. Please turn to Slide 9. The third quarter extends our track record of growth. We once again grew revenues, grew adjusted operating income and grew adjusted earnings per share with strong growth from all business segments across asset classes, and amidst a dynamic macro environment. These results are a testament to the strength of our business model, positioning the company at the center of some of the largest markets undergoing an analog-to-digital conversion, and which together make ICE an all-weather name that generates growth on top of growth. The diversity of our platform positions us to benefit not only from near-term cyclical events, but also longer-term secular growth trends. We've expanded into new asset classes, growing our addressable market and broadened our expertise, making our network significant and providing the opportunity to unlock additional growth by collaborating across businesses. We recently announced another new product from the collaboration between ICE Data Services and ICE Mortgage Technology, called the ICE Rate Lock Indices. Leveraging anonymized and aggregated data from ICE Mortgage Technologies leading origination platform, this suite of indices provides a more comprehensive, accurate, and timely reflection of residential mortgage rates. Building on this innovation, like we've done in other asset classes, these indices provide an opportunity to create additional products like rich analytics and better pricing tools for lenders. The opportunity to turn raw, unstructured data into actionable insights abounds across our business. Our climate analytics, for example, leverage our strength in the fixed income market with third-party geospatial data to help market participants better manage climate risk as a part of their overall investing and risk management processes. As ESG is increasingly becoming a component of investment portfolios, our technology and data expertise positions us well to deliver solutions that meet these evolving customer needs. We have strategically assembled a portfolio to drive growth across asset classes and macro environments, and part of this strategy is capturing value by thoughtfully repositioning businesses. This year alone, we harvested our gain in Coinbase, announced an agreement to do the same with our stake in Euroclear, and unlocked Bakkt via our New York Stock Exchange listing. These transactions expose billions of dollars in value creation and position us well to return capital to shareholders while continuing to invest for our future growth. It's collaborative efforts, innovative solutions and strategic capital allocation like this that have driven our growth for the past 20 years and which lay the foundation for continued growth well into the future. Before I end my prepared remarks, I'd like to thank our customers for their business and their trust in the quarter. And I'd like to thank my colleagues at ICE for their contributions to the best third quarter in our company's history, topped only by our record quarter earlier this year. I'll now turn the call back to our moderator, Dania, to conduct a question-and-answer session, which will run until 9:30 Eastern Time.

Operator, Operator

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. The first question we have is from Richard Repetto from Piper Sandler.

Richard Repetto, Analyst

Good morning, Jeff. Good morning, Warren. Can you hear me?

Jeff Sprecher, Chairman and CEO

Yes, we can hear you clearly.

Richard Repetto, Analyst

My question, Jeff, is about the Mortgage Technology business, which I think surprised many. You touched on the closing in your prepared remarks, but I want to understand more about Closing Solutions and the new tools being developed for better insights. It seems that segment of the mortgage tech grew by 28%, or $19 million, in a market that appears to have softened slightly.

Jeff Sprecher, Chairman and CEO

Yes. Let me ask Ben to address that since he manages that business for us.

Ben Jackson, President

Hi, Rich, thanks for the question. In summary, part of our overall strategy for this deal was recognizing a long-term trend towards automating and digitizing the mortgage process to reduce the time it takes to close real estate transactions. The Closing Solutions business is highly transaction-oriented, with many associated costs reflected in the client's closing statement. This is one area that is significantly dependent on transactions. Looking at the components driving growth, the first is our previous acquisition of Simplifile, which facilitates electronic recording of closing documents at the county level. Over the past year, we've observed a trend moving away from paper towards digitization, with Simplifile playing a key role in this growth. The second component is our well-known business, MERS, which now offers a bundled service that combines several specialized services, including loan registration and e-note registration, which is gaining traction in the industry, along with lifetime servicing transfers. The third area we have discussed in earlier calls is our eClose launch, which leverages our expertise from MERS, Simplifile, and the Ellie Mae business. We integrated Ellie Mae's origination network with Simplifile's settlement agent network, and launched our eClose offering in the second quarter. In the third quarter, we enhanced this offering with our proprietary e-signing capabilities. This month, we introduced our proprietary eNote as part of our loan origination document set and an eVault. Customer adoption of these solutions is increasing. Last call, I mentioned we had 55 customers in implementation; we now have 76. As this number continues to grow, it represents another opportunity for growth in our closing business, transforming it from a $200 million business 12 months ago to a $300 million business in the last twelve months, while still targeting that $1 billion total addressable market we highlighted.

Richard Repetto, Analyst

Thank you. Very helpful. And I don't want to jinx you, Jeff, but you get a lot of things going right at this time, it appears. Thanks.

Operator, Operator

Thank you. The next question we have is from Ken Worthington from JPMorgan.

Ken Worthington, Analyst

Hi. Good morning. On Bakkt, that has had a good run here. And while ICE is a founder owner, my impression is Bakkt seems to be more of a financial than strategic investment at this point. I guess, maybe first, is that the correct view? And if so, what is the intent for that investment? And how do you see the utilization or investment of the proceeds given the significant value creation we've seen here, even in recent weeks?

Jeff Sprecher, Chairman and CEO

Yes. First of all, we aim to position ourselves where analog to digital conversions are taking place, like in wallets. When I was a kid, I carried a leather wallet, but children today might never own one. We want to be involved in that transition. We chose to create Bakkt as a separate brand and entity because many of our investors didn't recognize the merging of institutional and retail markets. With increased access through digital tools, you can see that the lines between retail orders and institutional orders are blurring, as observed in US equity markets. We were concerned that our investors might not understand our capability to serve as both an institutional and retail network provider, which led us to establish a separate brand for Bakkt. Since it wasn’t being fully appreciated within ICE, we decided to give it a separate capital structure on the New York Stock Exchange. Moving forward, Bakkt will conduct its own earnings calls as a public company, and I’m no longer on the board, so I won’t represent the company from here on out. However, we see significant value in analog-to-digital conversions and are focused on capturing that value in our business. I believe this positioning will allow us to grow in various conditions. We're committed to Bakkt as part of the IPO and have made additional investments as part of the spin-off. We are very optimistic about the company and want to provide it with every chance to showcase its value to the market.

Ken Worthington, Analyst

Thanks. Great. Thanks very much.

Operator, Operator

Thank you, sir. The next question we have is from Brian Bedell from Deutsche Bank.

Brian Bedell, Analyst

Sure, thank you. Good morning, everyone. Referring to the mortgage sector and the performance in the third quarter, it was exceptionally strong. I appreciate the clarification on Rich's question. Ben, could you discuss how much of the strong results can be attributed to market share gains versus the initial traction of the products you mentioned? Additionally, regarding the uptake of those products in the third quarter, considering there are challenges in origination, repurchase, and refinance volumes, should we view this third quarter as a solid base for forecasting, particularly in transactional closing solutions?

Ben Jackson, President

Thank you, Brian. I'll walk through some of the factors that contributed to our growth. As we noted, the business grew 7% year-over-year, despite a decline in industry volumes that were up double digits. We also saw an 8% sequential growth from the second quarter to the third quarter, even in a volume environment estimated to decline by double digits. When examining each line item, we outperformed both in total and in each specific area relative to the overall transaction environment. In the origination segment, as I mentioned last quarter and reiterated today, part of our strategy involves shifting a portion of our revenue towards subscription models to reduce volatility. We are currently implementing this with a small percentage of our customer base, where the average client is under contract for four to five years. We've recently started transitioning some clients to subscription, and there's been strong interest in this model. As we add more customers and gain market share, new loans are flowing through our system, creating transaction volumes that help offset the overall headwinds in the market. The same situation applies to our data and analytics segment. This area, which focuses on automating the underwriting process through our AI tools, has historically relied almost entirely on transactions. We are gradually shifting it toward subscription services and are experiencing great success in cross-selling to clients. While implementation takes longer due to the complexity of integrating these automated solutions into existing workflows, we have several clients going live on the platform and continue to see robust sales. Finally, on the Closing Solutions side, I previously detailed the innovations and changes we've implemented. Simplifile is gaining market share compared to traditional paper methods. Our eClose solutions, which are new offerings in the industry, allow customers to subscribe to various components, including our e-closing room, document set, e-note, and vault services. Every transaction utilizing these components generates incremental revenue, and this area is relatively free from competition due to our unique capabilities.

Brian Bedell, Analyst

That’s great color. Thank you so much.

Operator, Operator

Thank you. The next question we have is from Kyle Voigt from KBW.

Kyle Voigt, Analyst

Thank you. Good morning. I would like to follow up on the last question regarding the transition to subscription on the origination side. You mentioned that a small number of those customers have switched to subscription. Can you provide some specifics on that? Is it under 10% of the customers, or do you have any figures to share? Additionally, could you explain the pricing structure? I previously thought that the recurring revenues on the origination side were primarily based on minimum fees related to volumes, but it seems that there might be some differences in the fee structure now. Could you elaborate on that and outline your strategy for migrating these customers? Thank you.

Jeff Sprecher, Chairman and CEO

Thanks, Kyle. Regarding the transition to subscription, we've transitioned less than 10% of our customer base so far, which is a small fraction. Now is an opportune moment to engage with customers about this shift. In a high-volume environment, customers are eager to adopt more automation and enhance efficiency to stay competitive. As we negotiate with clients, we are prepared to give up some transaction revenue, mainly the success fees from those transactions, in order to facilitate this shift to subscription. However, we also earn revenue from our network when loans are processed and services are ordered from third parties for the automation we provide, and that fee structure will remain the same.

Kyle Voigt, Analyst

And sorry, are those multiyear contracts with some sort of escalator in them? I'm just trying to understand the, I guess, the leverage as you continue to gain market share of origination volume, et cetera. I guess, are you taking away some of the upside by moving to subscription and just how do you view that balance? Thank you.

Jeff Sprecher, Chairman and CEO

Certainly. As I mentioned earlier, the average customers on four and five-year agreements will remain unchanged. We just initiated this approach this year, testing it with a select group of customers during their renewal process to validate our hypothesis, which we have confirmed. We have ample opportunity to continue this and drive subscription revenue growth moving forward. Regarding any potential downside, I believe we are minimizing the volatility in that revenue stream. Our potential for growth comes from the significant new innovations we are introducing to the market, such as our e-close offerings and the automation of underwriting, along with the analyzers we've discussed in previous calls. This new innovation will promote growth in transaction revenue while simultaneously reducing volatility and risk in other areas, such as origination, data, and analytics.

Kyle Voigt, Analyst

It’s very helpful. Thank you very much.

Operator, Operator

Thank you. The next question we have is from Dan Fannon from Jefferies.

Dan Fannon, Analyst

Thanks. Good morning. So I wanted to just talk about kind of capital allocation now that you've reached your targets. And resuming the buyback, was curious about kind of next year and kind of interim time period with the idea around M&A still being part of your strategy versus buybacks, and kind of the capital allocation priorities here in the near term, or kind of the next, kind of, start of next year as well?

Warren Gardiner, Chief Financial Officer

Thank you, Dan. It's Warren. As of the end of the third quarter, we managed to get below 3.25 times, which was our target to resume share buybacks that we established when we announced the Ellie Mae acquisition last August. We'll begin with up to $250 million this quarter, although I see this as more of a partial buyback since we still aim to reach three times eventually, and I believe we're on track for that. We'll balance paying down debt while executing these repurchases over the coming quarter. Looking ahead to next year, our approach to capital returns remains unchanged, similar to before the Ellie Mae deal. We'll return all capital to shareholders that isn't needed for investment or M&A through buybacks and dividends. You can expect us to maintain this strategy. The only notable change is that we have continued to grow our free cash flow organically and added Ellie Mae, which has been performing very well. Those are key points to consider regarding next year's capital return. Currently, we are in the process of finalizing the 2022 budget, and we'll provide an update in the next few quarters as that evolves.

Dan Fannon, Analyst

Thank you.

Operator, Operator

Thank you. The next question we have is from Chris Allen from Compass Point.

Chris Allen, Analyst

Hey, good morning, guys. I wonder if you get some more incremental color on the energy business. I appreciate the kind of long-term outlook. Maybe how you think about the business near term, the potential for the current environment to persist? Any color just in terms of the health of the customer base, when you're seeing new customers coming in. And maybe just on the LNG global opportunity, where you're seeing the biggest sources of uptake from a regional perspective?

Jeff Sprecher, Chairman and CEO

Thanks, Chris. So when you look at our energy business, and we've talked about this on several calls, one of the things I think that's come to light through this is that we are very different than any of the peers that are out there and that we've developed very deep liquid markets across the energy class spectrum. So whether it's coal, oil, gas, power, environmentals, we've invested heavily across that entire spectrum to give our customers the tools they need, to manage what we saw as a secular trend more than a decade ago of people moving towards cleaner fossil fuel such as natural gas, and towards environmental markets, carbon offset markets, compliance markets and the like. We made several acquisitions, climate exchange 10 years ago. We've been building out our global natural gas suite, and we have now a business that's substantially different than any of our peers. We continue to invest, as we talked about in prior quarters, our oil business, which is doing extraordinarily well with investments that we made in the launch of our Murban contract, that ICE Futures Abu Dhabi. We have a new contract in the Gulf Coast that's launching in the beginning of next year in partnership with several big physical players. And we're in the middle of a Brent consultation where Midland WTI may be added into the Brent basket. So you have a whole bunch of dynamics going on across this, and it's because customers know they need to manage their risk through this transition. And as I mentioned in my prepared remarks, I think the environment that you've just seen, you've got to peek into what it's going to be for a long, long time. This energy transition is going to be very volatile. Everyone sees the secular trend where investments are pouring into renewable projects and projects such as coal are not getting invested in. And the fact is any energy supply source, I don't care what it is, is susceptible to supply chain events, weather events, for example. If you have wind turbines and the wind is not blowing, it's not really easy to transition back to a coal-fired plant to get power back on the grid. So I foresee that we're in for a long ride of volatility. And now more than ever, the exchanges and the risk management tools that we provide are extraordinarily valuable to our clients, and it's important to us that we continue to engage with them as much as we ever have to continue to innovate.

Chris Allen, Analyst

Thank you.

Operator, Operator

Thank you. The next question we have is from Alex Blostein from Goldman Sachs.

Alex Blostein, Analyst

Hi. Good morning, everybody. Thanks for the question. I was hoping maybe we could zoom out for a second. You guys provided a lot of details around the new segments. But if you look at ICE today, 50% of revenues comes from sort of recurring sustainable business. It's grown at 10% for the last couple of quarters organically. And your guidance for Q4 implies about 10% growth as well. So maybe just walk us through how you think about sustainability of that recurring revenue base and the growth algorithm that we could think about here on a multiyear basis? Thanks.

Jeff Sprecher, Chairman and CEO

Yes, that's a great question. The key takeaway is that this has been a deliberate evolution by the management team. We originally started as a highly transaction-oriented company, but have always aimed to establish a larger, growing base of recurring revenue that we can rely on. Part of our strategy to become a stable company involves finding opportunities in analog to digital market conversions, as well as creating a diverse portfolio of businesses that can withstand different market conditions. We aimed to enter the mortgage sector and worked for over a decade to position ourselves there, as it typically benefits from a low interest rate environment. We have other businesses like interest rate futures and some inflation-oriented products such as commodities that tend to perform better in high interest rate situations. Thus, from a transactional perspective, we aimed to build durability. We want consistent growth rather than being a company that investors flock to when interest rates increase and abandon when they decrease. The more we can secure growing and recurring revenue, the more confidence investors will have that we can maintain our dividend and reinvest in the business. Additionally, we aspire to have transaction-based businesses that can thrive regardless of the macroeconomic environment, making our company an attractive investment. This strategy has been in place for several years and is finally showing significant results. In the mortgage business, as mentioned, we've encouraged our colleagues to develop a solid subscription base that also allows for exciting transaction opportunities due to technological advancements. The same approach applies to emissions and liquefied natural gas. We have long discussed our belief that the natural gas market would become globalized, resulting in global benchmarks rather than just regional ones. Therefore, many of the metrics in your economic model have been carefully planned by us over a significant period. It's exciting that, in this quarter, everything has come together simultaneously.

Alex Blostein, Analyst

Great. Thank you.

Operator, Operator

Thank you. The next question we have is from Alex Kramm from UBS.

Alex Kramm, Analyst

Yeah. Hey, good morning, everyone. Just one quick follow-up on the mortgage side again. A lot of good qualitative detail, but I think what's missing a little bit is some more quantitative updates here. And I guess I know you don't give us any sort of numbers of mortgages that go in through your system a quarter, and I know a lot of investors are asking for that. But in absence of that, given that you're talking about a kind of like upsell, revenue upsell, sorry, maybe you can at least help us how much your revenue per mortgage has been changing over the last year or two? I mean, again, like if you're upselling, I guess, that revenue per mortgage should go up. So maybe some numbers you can put around that. And if you can decompose a little bit between pricing and certain new services that would be very helpful, too. So hopefully, you can give us a little something here.

Jeff Sprecher, Chairman and CEO

There’s a lot to unpack in that question. One area I can discuss is what’s driving our subscription growth, which is a key aspect of our strategy to increase subscription in specific areas of the business. Looking at what fuels that growth, the first element is that as customers renew, they tend to transition more towards subscription, particularly in our origination and data analytics segment. The second factor is new sales, which contribute to our market share gains. We are successfully adding new customers to our platform. Cross-selling services to our existing clients is the third component. This means we see opportunities to expand our services with current clients; for example, clients using our services for loan origination might also be interested in our retail channel or adding services like our Maven compliance or AllRegs offerings, all of which are subscription-based. We are focused on cross-selling these options. The fourth element is pricing. Our strategy indicates that for subscription revenue growth, an essential part of our target of 8% to 10% long-term growth, the contributions from renewals, new sales, cross-selling, and pricing will balance out over time and sustain our subscription growth. Additionally, regarding transactions, I mentioned numerous new products we are introducing, which we believe will help grow transaction revenue and offset declines in certain industry environments.

Alex Kramm, Analyst

Okay. But on a historical basis, the revenue per mortgage going through your system should be up, right? I mean just thematically or not? So to come back to the question.

Jeff Sprecher, Chairman and CEO

We don't necessarily look at it like that. But anecdotally, I'd say yes.

Alex Kramm, Analyst

Okay. All right. Thanks again.

Operator, Operator

Thank you. That was our final question. This concludes our question-and-answer session. I would now like to turn the conference over back to Jeff Sprecher for any closing remarks.

Jeff Sprecher, Chairman and CEO

Thank you, Danae. And thank you all for joining us this morning. We look forward to continuing to discuss our all-weather strategies with you as our world economy continues to evolve. And with that, I hope you have a great day.

Operator, Operator

Thank you. This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.