Intercontinental Exchange, Inc. (ICE) Earnings Call Transcript & Summary

Well, thank you, everybody, for joining us here. This is the ICE fireside chat. It's my pleasure to introduce Warren Gardiner, the CFO of the Intercontinental Exchange. Warren came to ICE in 2017 and became CFO in 2021. So thank you very much for joining us here today.

Sure, great to be here. Thank you.

So I wanted to start out, for those of you who are not familiar with ICE, so Warren, can you talk briefly about sort of what ICE is and maybe the progression of the company from exchange to data provider to mortgage infrastructure?

Sure. Now it's a great place to start, and thank you all for joining us here today. So I think when you think about what we do at ICE, there are 2 kind of core key competencies. There's data services and technology. And if you think about the evolution of the company over the last couple of decades, we started out in the energy markets, energy futures markets. We started with a couple of contracts within somewhat of a narrow area of the energy market, certainly as you look at them today, and expanded that from those few contracts to today, what's thousands of contracts. And we did that through a combination of organic growth and inorganic growth, with a goal or a mission to really be as present across the workflow as we possibly could to really address all the various pain points that customers have across their workflow. And it's at a blueprint or an approach that we've really taken as we've thought about additional asset classes and entered those asset classes that are adjacent to energy and expanded further from there to have that blueprint of being across the workflow to utilize data, utilize technology to bring efficiency to the customers' processes, and to drive growth for ICE, of course, in that way. And so when we think about ICE going from the energy futures markets to expanding from that into interest rate markets and ag markets and then into equities, fixed income and now mortgage, it really is the common thread that runs throughout all of those asset classes and the blueprint that we use as we think about expanding in the asset classes that are newer, if you will, is really to take the data services expertise we have, take the technology expertise that we have and apply it across those asset classes, and again, to really just drive efficiency for the customer and grow through that method. So that's, at sort of a basic level, how we think about the company and how we approach the different asset classes that we're in.

Great. A few weeks ago, you closed the acquisition of Black Knight, so congratulations on that. So ICE is holding a conference call to go into more specifics on synergies, integration, sort of update investors. But from a higher level, can you tell us a little bit about what you purchased conceptually and what you're trying to do within mortgage?

Sure. And that's a good extension of what I just said. And then if you think about what we have currently, so prior to Black Knight -- I guess, currently, we have all of it, of course, because we did close last Tuesday. But prior to that, we had a component of the workflow. We had application through the closing process of the U.S. mortgage. What Black Knight brings us is the servicing component, almost like post trade in a way. So after the close, the loan will go onto somebody's books and they'll need some form of technology or some -- they'll want to provide some sort of service to make sure payments are made, taxes are distributed correctly, all those kinds of things that certainly technology can help enhance. And what we've done with this particular acquisition is added that next leg of the workflow. And as I said earlier, really put ourselves in a position where we're now across the workflow, and I think in a really unique way that really no one's done before. And so what it will bring to us is it's a couple of things. First, it positions us now within an addressable market that's about $14 billion that we are a fraction of today. So certainly, well positioned within that addressable market to go capture an increasing amount of it, like we haven't been before, and like I think many of our peers out there are not positioned to do. Within that and how we're going to do that, again, it comes back to data, it comes back to technology and applying those to the workflow and across the workflow to make that happen. And so a couple of examples that may be helpful here. So to think about that, as we integrate servicing with the origination side is that what we'll be able to do with that integrated platform is ultimately really collapse the time it takes to originate a mortgage. Today, it takes 60, 70 days at times to originate what is a pretty basic product that many Americans, many people around the world utilize at some point across their lifetime. And -- but today, it's still a very inefficient and long process for people to complete. By integrating servicing with the origination side, we'll be able to bring together these 2 platforms that, as someone is filling out an application to either refinance a loan or to go purchase a new house or a loan for a new house, a lot of that will start with the information from the prior -- the property that's either being sold or refinanced. We'll be able to fill backfill into that application, really start to speed up the time it takes to complete that application over time. And again, I think it's a step that again, without these platforms integrated the way we will integrate them over the next number of years, you just wouldn't be able to do. And again, I think one that we are uniquely positioned to do as well. Another area that you may have heard us talk about too is within the data space. And so certainly, there's a lot of data on our current platform. Today, the origination platform, almost about half or so of loans in the United States are originated on this technology. We're not -- for what it's worth, we're not taking balance sheet risk or doing that. We're really providing the picks and the shovels for people to go and originate those loans. So about half of the market is originated on that platform. Black Knight has over half of the market serviced on its servicing technology platform that now is, of course, part of ICE mortgage technology. And so you've got a lot of raw data on either platform that gives you a lot of real-time information on what's going on currently in the United States mortgage market. I think over time, we'll be able to take a lot of that data, and we have some foundation for this today, which I'll touch on in a second, but we'll take a lot of that data, package it and create products that not only the primary market, I think, will be interested, so those servicers and the originators that are on that technology platform, but also the secondary market, so MBS traders, investors in those kinds of securities, those two will be interested in a lot of the transparency that we're able to bring to that market that really just hasn't existed before. In a way, because of the market shares that we have, that others will compete with, but I think we'll be in a unique position to drive forward. And the other unique part of it as well is that we've got in our Fixed Income and Data Services business, about a thousand or so customers that take end-of-day pricing -- end-of-day pricing for mortgage-backed securities currently today. Those are people that are a captive customer base that we will again uniquely be able to sell these products into through our Fixed Income and Data Services segment. So again, I think it's a unique component of it that, as you bring, that neither one of these platforms really is, on a stand-alone basis, would be able to do in the way that we're going to be able to do it. And again, it comes down to not only bringing some greater efficiency and transparency to the primary markets, but really those secondary markets as well that, again, are really big markets that for decades now have been really, I think, in need of a lot more transparency relative to where they stand today.

You mentioned workflow a lot as part of the answer there to operate throughout the workflow of a mortgage. As part of the acquisition of Black Knight, Black Knight has divested Empower and Optimal Blue. How do the divestitures of those businesses impact the workflow of the mortgage? And do you still have the control that you want over those different aspects of the mortgage origination process to take out the time and cost as part of the mortgage process?

Yes. No, it's a good question. And yes, this year, at two points this year, back in March and then more recently, late back July, early August, announced late July, that's the divestiture of Optimal Blue. But -- and I'll start with Empower, just go kind of chronologically here. So Empower is a loan origination system. We sold that to a company called Constellation Software. We had a loan origination system already. We are the leader in the industry. That would have been something that may have been sort of nice to have, certainly maybe complementary to what we have, but it certainly doesn't take away from anything that we're trying to do from that perspective or within that component of the workflow. So I don't think that, that's anything that people should be concerned about in terms of how that impacts the strategic rationale of this deal. The other area, Optimal Blue, which is what we've gotten some questions on somewhat understandably, is it's a product and pricing engine largely bringing the customer, in this case, our customer that's on our loan origination system, different prices for different products for different types of -- or borrowers, I should say. Alongside that, a number of different analytics that kind of help them make the right decision around how they should price particular products. The unique thing about this is typically when you divest an asset, you are losing access to that asset, or your customers are losing access to that asset. In this case, Optimal Blue is a product or a set of products that have been on something called the ICE Mortgage Technology Network for quite a long time and have been on that network through a number of different owners of that asset as well. And that will continue in the future with Constellation. And we get a little bit of a revenue share off of that each time one of our customers uses that product. So there's a benefit to the ICE business as well that comes with that, that's been there and will continue to be there. But I think more importantly, and to kind of reiterate the point, we -- as I said earlier, we, as a group, our customers as a group, we originate almost half of the mortgages or around half the mortgages of the United States. Very important customer set, of course, for anybody that's offering point solutions across that workflow. And so we are actually, as a group, those -- our customers as a group are the largest customer of Optimal Blue. And so that will be a relationship, I think, will be around for quite some time. And also, because they will continue to have access to those products, it doesn't really change anything from us, from our perspective in terms of building that life of loan product and certainly doesn't change anything from a strategic rationale standpoint in terms of what we're trying to do in the mortgage space. Because again, what we really wanted with this transaction was the servicing business that is coming over and the data and analytics that are coming over. Because ultimately, that stitching together those things across the workflow are how we're really going to make an impact and drive change and behavioral change over time.

I want to spend some time on interest rates. The interest rate environment in the U.S. is different than we've seen in quite some time. Rates are higher than they've been for 20 years, and rates have increased at a pace we haven't seen for 50 years. So I want to sort of go through some of the different businesses and see how the rate environment is impacting ICE. So maybe starting with data. So ICE hosts a bunch of fixed income data sets and services. How have higher interest rates impacted the data business at ICE, anywhere from the transition of bonds to treasuries? Where have rates impacted ICE?

So there's certainly been areas within the fixed income and data services segment that do a little bit better and do a little bit worse within different types of interest rate environments. And so the last couple of years is actually a great example of this. So 2020, 2021, certainly, we had very, very low interest rates throughout pretty much most or all of those 2 years and previously. But -- and so within that time period, you saw our data businesses, they continue to do pretty well, compounding growth coming off of those data businesses within that Fixed Income and Data Services segment. Less of a contributor would have been our bonds business and our CDS business, although still as a segment overall, continuing to grow, continuing to expand margins despite that kind of environment. As we shifted in 2022 and now obviously in 2023 to a higher rate environment, you've seen a little bit of, at least in the outset, some of the end-of-day pricing within our data business, we've had a little bit of a slower sales cycle. Certainly, in periods where you have a sharp move in interest rates, fixed income managers come under pressure. And that's something that's seeped into the sales cycle for us a little bit over the last couple of quarters, although we are starting to see a little bit of a thaw there. On the flip side of that, though, the trading businesses. So our bonds business, bond trading and our CDS clearing business have done really well. And actually, over the last couple of years, we've had double-digit and high single-digit growth over the last couple, 2 quarters or so in that segment overall, and taking the margins from sort of the high 30s to the mid-40s. And so you've got 2 dramatically different interest rate environments, but you have very strong growth throughout each one of those and I think continuing this year and into next year as well. And it's really -- it's sort of a microcosm of ICE overall. You hear us talk about an all-weather name. This is one segment within a bigger business. But it is a testament to that in that we can grow through a lot of different types of macroeconomic environments, which ultimately, at least for me in my seat and certainly also for all of you in your seat as investors and analysts, gives you a little bit more visibility into cash flow streams. The durability of that cash flow stream is obviously appreciated for someone like me in my seat, and really ultimately and probably most importantly, enables us to really invest across the business, not necessarily in that one business or segment but across the business through cycles in ways that I think others who may be vulnerable to more -- to cyclical factors less than or more than we are. And so I think it really puts us in a better position competitively than if we weren't -- we didn't have that at all-weather or diversified business model.

And how about interest rates in the mortgage business? How has that sort of impacted the transaction side of what you're doing in mortgage?

So there's definitely been a headwind from that particular macro condition within the mortgage business, obviously on the transaction side more so than the recurring side. Recurring today is around 2/3 to 70% of the business, but it certainly was smaller when the transaction revenues were a little bit higher. And so we've seen some fluctuations there, for sure, that -- but at the end of the day, what we weren't -- we didn't enter this mortgage market. We didn't enter the mortgage market for 1 quarter or 1 year. We really entered it to -- because we saw an asset class that was tremendously inefficient that we felt we could apply, again, data and technology to, to improve. And so this is a long-term bet. We're not caught up in the quarters over the years in that way. And what I think you all should be thinking about it is that mortgages are not going anywhere. We're seeing large banks, a lot of other institutions investing in their infrastructure, their technology stacks, coming to us for solutions on how to save money and to be more efficient. And that -- mortgages will recover over time. They will happen. And so we think that this particular moment in time, like we've seen in other markets and other periods where you've seen headwinds such as this, macro headwinds such as this, that you can be a catalyst for behavioral change. And a lot of the conversations that we're having with our customers are around exactly that and thinking about how they can and should adjust their cost structures and think about their business and position their business better for the future, not only for maybe a mortgage market that could look like this for a little bit here, but also for when it does return. A lot of the contracts, for instance, that we have are multiyear in nature. So by that virtue of that fact, these are people investing in multiyear initiatives. And so a lot of these customers want to put themselves in a position here today that when things do come back and turn, that they're better positioned to it -- for it than they were maybe last time, where a lot of times what people did was throw more people at those -- not really problems because it was a good market, but in order to help them -- or help facilitate business in that sense. And so this time around, I think people are thinking a lot more around automation and efficiencies in that nature. That's going to be ultimately helpful, I think.

So you talk about ICE as an all-weather firm. How does the acquisition of Black Knight make ICE more all-weather and all-purpose with regard to interest rate sensitivity? So if Ellie was more transaction-based, Black Knight more recurring, how does the combination look in a volatile interest rate environment?

Sure. I mean you can see some of the performance in their recent results, which actually include some of the businesses that are a little more cyclical that have been divested in Optimal Blue and Empower. Those tend to be -- have a little more cyclicality to them. And so what we're now getting here with the acquisition we've made in post divestiture is a business that actually is a little more resilient and durable in that sense. And so it's about 90% or so recurring revenue in nature. The servicing business, in particular, isn't going to be as impacted by the swings that you could have in the refi volume, tends to be more the purchase or the new loan coming on the platform that, in addition to sort of new products and other enhancements we'll make, is a key driver of growth of that business. And so ultimately, what it really brings to us in the mortgage segment is and ICE overall is more durability in terms of a revenue stream that I think will, again, with the combination of what we have, not just in mortgage but also across ICE, will position us to invest in that asset class and other asset classes, and really, again, put ourselves in a better competitive position down the road. And I think a lot of other firms might be in as a result of it.

So finishing up on sort of the interest rate section of my questions. So ICE is a company that's grown through acquisition from its earliest days and the loan and debt markets to sort of help finance this growth. So as we think about ICE being an acquirer in this higher rate environment, how is this likely to impact the outlook for acquisitions for ICE?

So it's certainly an important component of how we think about creating value. Return on invested capital is a key metric for us. And then within that, of course, or alongside that would be your cost of capital. And certainly, over the years as we've diversified our business, you've seen our [ cost in ] become bigger, frankly, and more durable. You've seen the cost of capital reduced pretty significantly from the teens to now the mid- to high single digits in terms of where we are today. But we always set sort of a right target or return on investment target firm-wide of 10% or more. And so we've always had a buffer between where that was to begin with. And so as we look at that for acquisitions and we think about that -- and frankly, it doesn't just apply to acquisitions. It implies to internal projects and organic growth as well in terms of how we think about these things. But that will be certainly a factor, but as long as we're creating value, as long as that return on invested capital and the trajectory of that is improving. Certainly, when you have deals, there's -- your return on invested capital at a firm level will be reduced a little bit in the interim. But over time, that will grow. And as long as you're, over time, know that you can exceed your cost of capital whether it's a project or an acquisition, you should do that acquisition or you should do that project. And so we will think about that. It's certainly part of the equation. But at the moment, I don't think it's something that is prohibitive. What probably does change our focus a little bit at the moment is more that we had taken out some debt to, of course, finance this acquisition of Black Knight, and we do have leverage targets of 3.25x to -- of where we would then begin to buyback stock and 3x where we would be full force buyback. And so we have to do pay attention to that, of course, as we're thinking about the next couple of quarters here in terms of paying down the acquisition-related debt and getting to those leverage targets. But that's how we're thinking about things.

Excellent. So digging more into the businesses, maybe starting with data. ASV growth in data was about 3.5% in 2Q '23, ex-Euronext about 4%. Lower than sort of the mid-single digits that we've seen from you in the past. Can you talk about what drives that ASV growth back to sort of the mid-single digits and what we can expect in the future for growth in data?

Sure. So yes, we've been sort of in that 5% to 6% range since we acquired IDC, which was back -- end of 2015. Nothing's changed on that target in terms of how we're thinking about and what we expect from that business and hope for that business. Now mid-single-digit range would include 4%, at least in my book, but -- and so we're towards the lower end of that range or have been this year through the first few quarters. That largely has been driven by 2 things. So as I mentioned a little bit earlier, you've certainly had a -- you've had a challenging year in fixed income markets last year with the rapid rise in interest rates. That seeped through to the sales cycle, if you will, on our end-of-day pricing business. That's a key input in terms of what people use when they launch new funds, or people just that are involved in the fixed income markets. The engagement, if you will, has been a little slower than it's been in the past, in part because of what we had last year and into this year, to some extent. We are seeing some signs of that starting to thaw. Certainly, when you get to points where interest rates are stabilizing or don't seem like they're going to be going up nearly as much as they did in the prior period or last year or so, fixed income becomes a pretty attractive asset class for people. And the ecosystem will benefit from that. And I think you're starting to see fund flows and indicators, health indicators such as that, that give us -- are encouraging from a sales perspective as we kind of look into the back half of the year. The other part of it, too, is we have an index business, it's about $100 million or so in total revenue. It's very much driven by assets under management. And so of course, when you had some of that downdraft over the last couple of quarters, at least the first half of this year and the back half of last year, we had a little bit of an impact on growth as a result of that, too. And so as we kind of get to the second half of this year, some thawing in the sales cycle, some improvement at the very least in the comparable periods from last year on the index side, should be helpful to the overall growth. It's not a business that goes from 0 to 60 in 2 seconds, necessarily. It's a big subscription-based business, which is great, why we love it. But I think you should start to see some improvement there, again, because of those factors which were drawing -- dragging us down a little bit. Now again, the good thing about that segment though, as I mentioned a little bit earlier, is that despite some of those headwinds impacting that fixed income and data business, we've had tailwinds helping our transaction business on the bond side, as I noted, and the CDS business, as I also noted. We've also had some really strong trends across our other data and network service business, where our desktop products are, our feeds products are and some of our other analytics. And so we've had a really strong growth, high single-digit growth out of that business, which, again, has been helpful to the overall growth rate, from a data services perspective with that segment. And in an overall segment basis, again, I think we had 6% growth through the first half or so, continue to expand margins in that business as well. So it's not that kind of performance, despite some of the weakness on the data side that we're having from a cyclical perspective, it isn't something we're really losing sleep over.

Energy Trading. Energy trading has been great. So maybe start, why has it been so good?

I don't think it ever wasn't good. It just had a little bit of a pause last year from some of the very unfortunate events in Ukraine. Certainly, at the outset of that, you had a lot of volatility. We do benefit when things are volatile and that initial uncertainty comes through. But following that, we had capital requirements at our clearing house we had that went higher. There were some contracts, our gas oil contract, in particular, that had Russian molecules within it and allowed to be delivered that we had to sort of repurpose and take those -- that out of those contracts in order to reposition in light of sanctions. And as we moved through the year, some of those pressures really started to abate. And as we got to this year, with those pressures having kind of flowed through, I think what you saw was a continuation of the trends that have been propelling that platform over the last number of years. And really, at its core is this -- people call it an energy transition. I think it's really more of an evolution of energy. And what we've positioned ourselves or how we positioned ourselves in this platform is to be across the world and across all the different sources of energy, so that we're not necessarily picking or choosing but allowing the customer to really manage the risk in the way they see fit. And so what we've seen is just the reemergence, if you will, of those trends over the last number of quarters, and that's really benefited not only the open interest in the volumes, but we've seen strong participation growth across key markets such as our TTF contract, which is really -- has formerly been kind of the European benchmark for gas, but now it's really become more of the global benchmark for gas. We're seeing some positive trends in our environmental markets as well. And again, I think just a platform that I think can continue to compound like it has over the last number of years. We've also seen -- I mentioned our desktop business a little bit earlier. We've seen strong growth in our desktop in part because there's an energy component to that desktop that we've invested in over the last number of years that also is doing really well, helping to drive a very strong growth that we've had in desktops. We're seeing, as you would imagine, alongside that and participation growth, some strong trends in our energy data business as well. So it does feel like there's more of this, as I said, groundswell kind of reengagement going on within energy as an asset class. And I think it's in part because of the -- just the continuation of those secular trends that are underpinning the growth we've seen over the last number of years.

You mentioned the environmental business. How is the concept of clean energy and renewable energy sort of impacting ICE's business? And how are you adapting to a world that's looking to develop cleaner energy resources?

Yes. So this is a theme that ICE, Jeff and ICE have been thinking about for over a decade. And I think the proof is in the acquisitions that we made of both index, which as I mentioned earlier, TTF, benchmark for natural gas, and I'll call it cleaner energy, too, by the way, benchmark for European natural gas at the time and now has really emerged as kind of the Brent or global benchmark for natural gas. And then also the Climate Exchange, which also is about a little over maybe 10 years ago as well, that as you would probably imagine, if you don't know what it is, is our environmental -- call it the foundation for our environmental business. And together, natural gas and environment is about 40% of total energy revenues for us today. And it's one that's grown into the double digits over the last 5 or so years on average, not every single year, but on average. And so I think as we're thinking about the future, that's a core foundation that we're going to continue to build on, much like we did with our oil business, where we had Brent crude oil as kind of the foundational or cornerstone contract that we went and built hundreds of other oil contracts that hang off of that, that are critical to the commercial customers that are managing risk in this ever-evolving energy workflow that is ever becoming more complex. And so I think as this energy evolution continues, those workflows are going to continue to increase in complexity. That's going to require greater risk management, more data, more transparency. And that's what we're going to be positioned to do because we have a platform that really spans the globe and spans the different sources of energy, importantly, as well.

And so maybe transitioning to the mortgage business. ICE's goal has been to digitize the mortgage origination process. You've talked about the cost of originating a mortgage being somewhere in the range of $10,000, 60 days to actually originate. Can you talk about what ICE has been able to do thus far with Ellie in terms of maybe taking that $10,000 cost down. And as you build in Black Knight, where does that go? Where are the cost savings? Where are the days savings? And then if you can -- even if you can't give us numbers, how does that savings fall between maybe ICE, your partners and what you would guess would flow to the end consumers?

I think it's early days still. And I think the opportunity for us having and starting to stitch this together begins with the fact that we've got a lot of the customers that are going to care about mortgage origination and servicing, they're on the platform already. And the opportunity for us is to create products whether it's within our data and analytics business or some consumer engagement products, and I'll get into those in a second, to really then take this next step forward in terms of digitizing and collapsing the time and cost it takes to originate what, again, should be a pretty standard product in -- for the world and the United States citizen in that sense. And so I think when we think about the opportunity on the data and analytics side, we've got a couple of these products. They're called -- we call them analyzers, for instance. And then what they really are aimed at doing is attacking the different tasks that exist across the origination workflow and automating those tasks. So an example of that for us would be our income analyzer. And so as you're originating a mortgage, the lender needs to verify that you make as -- the same amount as you said you make. And they'll look at your W-2, they'll look at your bank statements and they'll do stare and compare work today that can take a decent amount of time and often actually has some errors in it and needs to be corrected. And again, it's just more waste -- or inefficiency, I should say, within a process. Our analyzers will leverage document readers to extract the relevant information, do the stare and compare work and check that box for you in a fraction of the time with far less in terms of errors, if not any errors. And so again, building out those analyzers across the workflow across those different tasks is a key part of how we can then collapse the origination time relative to what it is today. The next step of that, too, is -- again, I alluded to it a little bit earlier, is around -- is on the servicing side, where again, connecting that with the origination platform will also enable people to reduce the time it takes to originate a loan by feeding a lot of the data into the origination system and doing a lot of that work for them that they'd otherwise have to do manually. And so I think it's a process that will take some time because we do have to do some work on the technology side to make that happen. But ultimately, we are positioned, I think unlike really anybody else in the industry, to make that happen. And so to the extent that there is a dramatic change in time it takes to originate a mortgage and a change in the cost for a mortgage, this is where it's going to happen. And I think it will be a great thing for the housing industry, particularly on the cost side over time, because there's a lot of people where that $10,000 costs originated is an enormous hurdle. And so being able to kind of take that down and open up that product, mortgage product to more people is going to be a really powerful outcome not only for ICE, but maybe more importantly, for people out there in the U.S.

We've got about 10 minutes left. We'll open it up to your questions. Are there any questions? Okay. Let's keep going. Let's maybe move on to the realm of digital. We're seeing digital currencies, Bitcoin, Ethereum in crypto grow broadly. What is the role that ICE wants to have in digital currencies from an exchange perspective, a data perspective and infrastructure perspective?

So I'm going to give a little history on what we've done to help you understand where we were, where we are and where we might be going. But -- so we did make us a very, at the time, at least, a small investment in Coinbase years and years ago, probably about $10 million or so. We -- it was about 1% of the company. We wanted to do that to understand the asset class a little bit better. It was a little more nascent than it maybe it is today. And we wanted to also importantly understand blockchain and understand potentially how that could be applicable to other areas of our current or existing business. And so we made that investment. We ended up selling it back in '21, I think, early 2021. We're about $1 billion total, so certainly a good return.

Towards the peak.

When it went public. That wasn't a comment on Coinbase. Don't get me wrong on that. But strategically, 1% ownership, for ICE, at least wasn't -- that wasn't strategic. And so -- and we were also in the mode of wanting to pay down some debt related to the Ellie Mae transaction. So we made that decision on there. I certainly learned a lot about the asset class and actually was something that helped inform our decision prior to that to build a company called Bakkt, which is now publicly traded on the New York Stock Exchange and one that we really built in-house and later spun out. That was a platform designed to be a platform for digital assets, whether it was a wallet or some trading capabilities, to really be a platform that was backed by a reputable institution. Bakkt, in fact, was meant to mean that, and really help if the asset class was going to become institutionalized and bigger, that was going to ultimately be a component of that. And so we still have a stake of 68-or-so percent stake in that company. We don't have control in that sense, however, though, and then that's where we are today. I think it's an asset class that certainly has gone through some challenges in the last couple of quarters. But I think to the extent that it does mature and become more institutionalized, which it seemingly may, Bakkt, I think, will be a beneficiary of that. And then we will be rewarded through that, if you will, as that emerges. So that's really what we're doing on that front, which is certainly more passive than active, but that's how we've been thinking about that asset class.

And then maybe just wrap up on capital management. Maybe update us on the path towards deleveraging. At what point do you feel comfortable sort of buying back stock again? So what is the path forward on capital management?

Sure. So we -- so alongside the Black Knight transaction, we've taken out a little, close to $10 billion or so of debt in total. We did $5 billion of that back in May of last year at a coupon -- blended coupon of around 4.25% with an average maturity of about 13 years. Those were SMR notes. So there was an option if the deal did break, which it, of course, didn't, then we would have returned that money at a small premium. And in fact, that money has been sitting in money market funds over the last couple of quarters until we distribute it. Of course, [ we're on the side ] of the acquisition and earning more than we were paying in interest expense. So a nice carry, if you will, for a period of time there on that front. The other component of that was commercial paper and a term loan that we drew down on late in August. That -- the reason we didn't take out more last May was because we wanted to have a chunk of debt that we could pay down in the interim as we kind of move towards 3.25x leverage, which is the first milestone. And as we hit 3.25x, that's when we would start to buy back or can start to buy back some stock. And then we will continue to either buy back stock or I should say, buy back stock and potentially -- and pay down debt until we get to 3x. And so once we're at 3x, then I think you should expect, absent M&A or things of that nature, that would be the use of all free cash flow. So similar to the philosophy we've had for a number of years now where if we're not in acquisition mode, all free cash flow will return to shareholders through buybacks and dividends, and dividends which we've grown at a double-digit rate on average since inception in 2014 or so. So that framework has not changed as we're kind of thinking about our capital allocation.

And you operate 3 businesses, so exchanges, data and mortgage. If you think about what the next steps might be in terms of where do you go, could it be anywhere? Are you leaning towards one area or the other based on the growth outlook? You've invested so much in mortgage. Is it time maybe to go back to the exchange side or data? Or is it whatever the opportunity that seems best at the time?

I think there are opportunities across all of our segments, if you want to think about it that way. We -- I know we segment it that way, but we do think about it as one business, and we really run it as one business and really try to leverage a lot of the technology and potential data that we have in segments for other areas of our business as well, as we've talked about. So I think there's opportunity across our exchange segment. Energy, of course, particularly within the environmental business, is an area that's still I think pretty wide open. And then we certainly have a very strong footprint in to build off of. And for instance, we're 90%, 95% market share of the environmental markets we trade, which again is a great foundation to kind of build new products off of and build data products off of and things of that nature. Within our data services segment, we're always looking at different types of data sets and anything that we can take and plug into our distribution network and really accelerate that growth. I mean I think the index business is one of my favorite examples of that, where we purchased that in 2017, almost -- not even 2 years following the acquisition of IDC and took that index business, which really didn't have any revenue, to what is, as I said earlier, $100 million of revenue today by investing in that business, marrying and integrating it with the end-of-day pricing business that IDC had, real-time pricing and reference data business that IDC had and really positioning it far better than it was before. And so we're going to look for bolt-on opportunities like that really across all the segments. And really, we have the opportunity with mortgage now having certainly a foundational network across the workflow to really invest across all of the different businesses and drive growth just like we have in the past. And so we're excited about that. And in terms of maybe new asset classes, I think right now, I'm focused on paying down some of the debt we've got, but certainly, the framework, as I opened this conversation with -- about thinking about asset classes that are inefficient today that are analog that can go digital and that we can provide some sort of solution or service to, whether it's through our technology or through our data services and improve them that way, those are things that we'll be interested in and I think we can execute on.

Last chance for a question. Got to be a short one now. Thank you very much, Warren. Thank you, everybody.

Thanks, everybody.