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

All right. Hello, everyone. Welcome to the -- well, welcome to the third day, I would say, for me, because this is the first one I'm doing today. But this is the last presentation of this excellent conference that we've had here in South Florida. I'm Alex Kramm, senior research analyst at UBS covering the exchanges and business services. Delighted to finish the conference with, I guess, the best.

Right.

I shouldn't judge but, no, happy to have ICE finish us up. Warren Gardiner, CFO. And yes, I think we'll just jump right in, if that's okay with you?

Great.

So with the firesides I've done, I've actually started pretty big picture to let you ease in. But look, you've had a lot of distractions last year working through the Black Knight deal. That's now behind you. So I guess with the business now positioned post deal, like what gets you excited? And what should we think about over the next 1 to 3 years?

Yes. Good. Thanks for having me, Alex, and thanks, everybody, for joining today. So look, there's a lot to be excited, I think, across our platform, across all the different asset classes that we're in. And I'm sure we'll get more into the Mortgage business and talk a little bit about that, but that kind of comes to front in mind. As you mentioned, we did a couple of acquisitions over the last couple of years to really position ourselves within that asset class to do a lot of unique things across the workflow. And we'll talk a little bit more. I don't want to take too much away from what we'll certainly talk about in a little bit. But I think that's an area where there is a lot of opportunity to create efficiencies, again, across that workflow and do it in a way that ICE has done it across a lot of other asset classes in the past. And so really applying that blueprint after, of course, a year where we were certainly in the process of trying to acquire Black Knight. So that's exciting to kind of get to that stage. I think, too, if you think about the mortgage market generally, it's certainly in a period at the moment where it's multi-decade lows in terms of origination volumes. And so while that certainly has put some pressure on top line transaction fees, it's also an opportunity for people to really start to rethink about their technology stack and how they'd become more efficient. And those are kinds of things that we can really help them address. So I think we're at a point, too, where it's hard to see that environment getting much worse from here. And sort of there's a lot of upside, I think, down the road to come. So that's certainly an area that we're excited about. I think as we move to some of the other areas of the business, certainly within our Fixed Income and Data Services business, similarly, you had a challenging macro environment for fixed income broadly over the last couple of years. You saw that play out in some of our -- some of the growth we had in our Fixed Income and Data Analytics business relative to what I think people have come to expect. But over the last couple of quarters, you started to see those pressures abate and the sales environment get better. And I think as rates really started to stabilize, certainly, you have more of a reengagement with fixed income as an asset class. And again, we're really well positioned to really help the continued automation and efficiency within that asset class over the next number of years as well. So I think that, too, is at a good point as we sit here today. And then lastly, on the Futures side, it's certainly our oldest business, if you will, but open interest across the platform up 20%. It continues to churn and do really well. And so you bring all that together and it's a business, $9 billion of revenue, a little bit more than half of that recurring in nature, with 60% operating margin. So cash flow is a really robust cash flow stream that, I think, allows us to continue to invest in a lot of these opportunities even when they are in -- the macroeconomic environment isn't as favorable to really position ourselves later on for better days. And I think that's what you've seen us do over the last couple of years and will see us continue to do. So there's a lot of good stuff going on across the platform, I think.

Excellent. So why don't we unpack some of the stuff a little bit more? So let's actually start with Exchanges, which is still your biggest business. People sometimes forget that with all the Mortgage focus. But look, you mentioned a little bit just now, but energy volumes have continued to be super strong this year. So can you just help us with the sustainability of that business? And yes, what's the likelihood to continue this?

Yes. It's been -- I mean, last year was a record year for energy revenues, energy volumes. I look at open interest again within energy, up 25% right now year-over-year. We've obviously had a really good start to the first quarter through February. And so it feels like we've -- were continuation of these trends that we've seen over the last couple of years, if not longer, if not decades, a shift towards cleaner energy, an evolution of energy. I mean, if you think about energy as an asset class, it's one that, for centuries, has been evolving. And we've really positioned that platform across the world and across all the different sources of energy to capture that evolution and to help customers manage that. In addition to that evolution, you, of course, have growing demand, and you have growing supply -- or increasing complexity of supply chains as the world develops. That all, too, factors into the demand for risk management tools that we're able to really offer across the board in that sense. And so think about our oil platform. Obviously, Brent is really the cornerstone of that business. We've, over a couple of decades now, gone built around that benchmark and some of the other key oil benchmarks and added hundreds of other oil contracts, whether they're product spreads or locational spreads. And really, as Brent has evolved into becoming that global price of oil, that's really positioned us well to really also develop all the different contracts around it and why we're in the position we are in. And I think that index, we talked a little bit about it on our earnings call, but it may be called the Brent Index but there isn't really any Brent in there anymore. It's been an evolution, much like the S&P 500 constituents changing the S&P 500. And we recently added Midland WTI to that index. And we've launched contracts off the back of that, that have actually helped our -- not only Brent, but I think our legacy WTI business, where we're now hitting record levels of market share. So the oil business continues to do really well. We had a similar position, although continuing to evolve as well as within natural gas, where the TTF benchmark that we have, that sort of historically have been more of a European marker, has really evolved into the Brent, if you will, of natural gas and giving us an opportunity to develop around that benchmark, much like we've done in oil. And that continues to do really well. So we feel good about that. It's also becoming really more of the marker for LNG moving around the world as well. So certainly, last -- or around a couple of years ago, I suppose, at this point, where gas moving from Russia into Europe was obviously cut off. That opened up a whole new LNG demand center, Europe being in that instance that, again, we're helping people risk manage around the world. So that's been a good area for us. And then lastly, and there's acquisitions that we would have made probably 10 years or so ago around the Climate Exchange, brought us in a footprint within the environmental complex that is also doing pretty well. And we are 90%, 95% of those environmental markets. And again, that's an area that's still probably pretty nascent today. It includes renewable energy contracts as well that we're going to continue -- much like our other markets, we're going to continue to invest in those and build around the key benchmarks that we have and really evolve as that market evolves. And so again, I think we've got a really strong presence across the globe and across all these different sources of energy that just, again, as that energy as an asset class continues to evolve, I think we're really well positioned for it.

I did have a specific question about the carbon trading and newer energy initiatives. I don't know if there's anything to add from a TAM perspective. Again, it is very early still. So anything else you want -- you can unpack there for us?

Yes.

Again, I don't think a lot of people pay attention to it.

Yes. So it's about a $100 million business for us today. Again, we've been in that market for a long time, and it didn't -- frankly, didn't do much for a period of time. I don't recall it being received that well when we first did it, but it was obviously, as you kind of looked at what's happened and what's happened over the last number of years, it's a really smart move to build out the energy complex in the way that we did. And so look, today, we've got -- the core of that is really the carbon market over in Europe. That's probably the most mature, if you will, of all the areas that we're in. But even that, Europe has introduced new regulation, Fit for 55, where they're going to double the scope, if you will, the number of participants that are included in that compliance scheme over the next number of years. So I think there's a huge runway of growth for that, even just that, what is the most mature area of our carbon markets. Over in North America, we saw record volumes last year across a number of the different compliance schemes that exist there. And we continue to see demand from other regions within North America, whether it's states or provinces up in Canada that are looking to launch schemes as well. And so -- and again, we're kind of the home to those markets. And so I think as that world continues to develop and grow, we're going to be the place for where that happens.

Excellent. We should actually round it out on the Exchange with some of the other businesses. I mean, obviously, Energy is clearly the biggest business, but you obviously have a sizable Rates business. You had Ags and, obviously, Cash Equities and Options. I look back, and when you look at those businesses in aggregate, they've grown between 5% and 6% CAGR over the last 5 years, so still pretty respectable. Energy, by the way, has grown 9%, so that's certainly been the locomotive there. But on those other businesses, anything that we should be paying more attention to? And anything that could surprise us maybe this year on the upside or downside?

Yes. I mean, look, the ag markets continue to be -- I mean, they've always been volatile, difficult to predict. But there's definitely a lot of volatility around the world, and you're definitely seeing those in those markets and flow through those markets. On the rates side, we obviously had a switch or a transition over to SONIA a few years ago, and I think that's largely behind us. But as you've probably noticed, the open interest in that contract is really starting to build. It's up 20% or so year-over-year, and the volumes have been really good. And so we're seeing a real engagement in that market. At the same time, Euribor is doing pretty well, too, as well. So it's nice to see that kind of take over from Sterling and kind of start to see some robust volumes. And I think the interest rate environment over in Europe will continue to be fairly uncertain in terms of the direction that things are headed. So I think that will be an area that you could see some good growth out of. And then you mentioned Cash Equities and Options. I think more just interesting on the options side, we did just recently roll out the final stage, if you will, of a pillar replatforming that you may have heard us talk about. It's really the bringing together a lot of the disparate technologies the New York Stock Exchange that had when we acquired it. And so over the last decade or so, we've made a real investment and effort to really bring that together and improve and revamp that technology. And I think you're starting to see some improvement in market share on the options side, in part because of that. And so I think -- more than anything else, I think it's just as an anecdotal point that some of these technology projects that we take on can have real benefits. And it may take some time, but certainly, there can be benefits at the end of the day for us.

Last question on the Exchange segment, and it's really about pricing, which seems new to a lot of people, but you just took the step last year to raise pricing and energy. And then for this year, you just announced further increases in a few other areas. So is this really a new addition to the growth algorithm for ICE? And if you think about pricing, I guess, in that segment, where do you think you actually have the most pricing power going forward?

I don't know that it's necessarily a new addition to the algorithm, if you will. Certainly, we did it a little bit differently, where we raised some headline prices on some of our oil contracts, which we hadn't touched in quite some time, if ever. I think we've delivered a lot of value to that asset class over the years and felt like it was an opportunity to capture some of that value. And oftentimes, what we'll do is we'll change tiers or we'll do bundles and things of that nature that can affect pricing. Our goal is to really manage through those different environments and sometimes try to help incent volume and things of that nature. So we'll go different directions on that but, ultimately, with the goal of really optimizing or maximizing our revenue. And we like that flexibility. And so that was really more on the market maker or incentive tier side, whereas what we did a year ago or so was really more on the headline price side. And so this year, when we came to our budget season, we were thinking a little bit more about it and do feel like there was some opportunity, not just within just particular contracts, but really across that futures platform to maybe go capture some of the value that we've also created. And so we did touch a few of the contracts outside of the oil complex. We also changed some prices or adjusted prices on our data fees and then also some fees of the clearing asset. So I gave you all that detail to sort of help with how we think philosophically about price there. And it's not that it's -- we're going to touch each project -- or sorry, contract each year and do a certain price increase each year. We really do look across the platform where we created value and really just try to pick our spots, and we think that is there. And so that's really been the approach, really, for quite some time, and I think will continue to be the approach as we move forward.

Okay. Fantastic. All right. So why don't we switch gears to Fixed Income and Data Services? It seems like the growth is turning more positive this year. So the natural question is, what gives you confidence in your mid-single-digit growth outlook? How should we be thinking about the business longer term? And then is there actual potential for some acceleration of these levels? I think when I think about my coverage and what I consider peers for you in that business, they're certainly showing higher growth in their respective data services.

Yes, definitely started to get better, and I mentioned it a little bit earlier in the opening comments about some of the macro headwinds [indiscernible] class and the impact it had on that component of our business. As I think about the year, I think if you look at ASV exiting the year is around 4%. I think the first half of the year, probably [indiscernible] and then we've got more of an acceleration as you move into the back half of the year. And one thing that you guys don't really see with ASV is that ASV is everything that's been implemented, signed and implemented. But it doesn't have things, projects or products, I should say, that have been signed but not yet implemented. So we've got some good visibility into that, particularly on the connectivity side that you'll start to see through. But yes, look, I think it's been, for the most part, over the last number of quarters, you've certainly seen fixed income managers and people within that ecosystem start to reengage. You've seen the sales cycle improve. You've seen that show up in the growth of our Fixed Income and Data and Analytics business, moving from 2% growth in the third quarter to 4% growth in the fourth quarter. We saw better trends in our index business as things on the interest rate side has kind of stabilized and thawed as well. And so that's been encouraging to get it back to those kinds of levels. Double-digit growth is what we saw in the fourth quarter and what we had sort of been used to prior to rates moving the way they did a few years ago. And then all the while, and I think continuing, our Desktop business and our other Data and Network Services business line, our Feeds business will continue to grow nicely. Those have been sort of high single digit to double-digit growth at times. And I think when you speak to sort of maybe some of the peers, it might be more of a mix thing or maybe it is somebody that's got more of a desktop component or more of a feeds component. We've been growing just like that in those businesses, if not better. And so we've been pleased with those. And those have been investments that we've made over -- multiyear investments that we've made in those products that came to us with the IDC acquisition. IDC is often thought about as just sort of end-of-day pricing. But there are a lot of other areas that are -- were smaller at the time they came over to us, and we made some investment in those, and you're really starting to see that pay off across that. So that's been great.

Just a quick follow-up because you mentioned sales cycles getting better. So anything specific to unpack there, how that's been trending?

Yes. So I think as we moved through last -- towards the end of last year, middle to end of last year, you're really starting to see more of this interest in reengagement on the Fixed Income because that's where it really had been. We can't control asset levels and AUM levels. So those will move with markets, whether it's fixed income or equities. But the sales cycle that we've been talking about in the commentary, there has been really on the end-of-day pricing side and within Fixed Income, particularly. And so that's an area that, as you would imagine, when rates are moving like they were, people were less likely and willing to launch new products or sign those contracts. Certainly, we're having great discussions. But that thing's kind of stabilized on that rate fund. I think you've seen people start to reengage a little bit more. And it makes some sense because interest rates at these levels, if they're not going to move sharply higher from here, becomes a really attractive asset class for people. And so I think you're starting to see that reengagement, and that's one of the things that I think is really helping the sales cycle.

Great. All right. Maybe finishing on that segment on the much smaller transaction piece of Fixed Income and Data Services. Can you talk about those trends on the execution side a little bit more? The business has finally shown some strength over last, I don't know, 18 months maybe. Is it all retail muni? I think that's what most people know about those assets. Or are there other notable trends you would highlight? And then of course, given that you're pretty small scale there, the other question I always get is, what's the appetite to expand beyond what you have on the transaction side, execution side?

Sure. So I'll start sort of at the beginning of that question. So it's not all retail muni, although that certainly is what BondPoint TMC largely were when we acquired them. And one thing that we've done over the last number of years, despite a lot of the headline volatility in those revenues and those markets, was invest and try to build out the institutional side. And it's taken some time, but I think we've had some pretty good success. I mean, you saw the top line revenue year-over-year in the fourth quarter was sort of flattish, if you will. But underneath the covers there, we had double-digit growth in institutional corporates and munis. So we're starting to really see those -- that trend play out. And we've been able to really leverage the back office, middle office and front office connectivity, frankly, that ICE has. Back and middle maybe more sort of the Fixed Income business in that segment, but certainly, across the broader ICE to kind of move into some of those institutions and build out some of that connectivity that didn't exist pre-acquisition. And so that's been certainly a good result for that business, and I think will continue to. On top of the fact that munis and corporates, although maybe munis a little more than corporates, there's a tremendous opportunity for those to continue to automate this asset classes and electronify as well. Munis is still really trailing high-yield and investment-grade corporates in terms of percentage that's traded electronically. And so we're really well positioned for that to continue as well. I think in terms of what we would need, I don't think there really is anything that we need. Obviously, we've done a good job with those assets. The revenue has been volatile, but since we acquired them, we've grown double digits on average in terms of the revenue there. And a lot of that has been because of the data and the pre- and post-trade analytics and things that we have around that trade, around the match that they've really, I think, uniquely positioned us. So I don't really feel like we need much there. But we always look to be opportunistic, and I say that across every asset class.

Fair enough. All right. So let's get into Mortgage, which, as I said at the beginning, seems like that's taken a lot of the attention over the last few years here. So maybe, again, a little bit more bigger picture, we can start talking a little bit more about the division that you and the team have here. So you made 2 very big acquisitions. You're now the dominant player in both mortgage origination and servicing. So where do you see this business in 5 years?

So Mortgage is a business ICE really first started to dip its toe in, I think, maybe even before we were public or right around in a very, very small way, more on the trading side. It's been an area and an asset class that Jeff -- as all of us really know. But it's always been very inefficient and really ripe for change and evolution, and one that we've always felt like was something we could bring our expertise in data technology, frankly, just for operating an asset differently to improve. What we didn't quite know was how to do that and what -- how to leg into it. And so you saw us in 2016 buy a stake in MERS, in the Mortgage Electronic Registry Service, kind of just a database for mortgages and really the golden record, if you will, more in the closing end of the workflow. We then purchased a company called Simplifile, which was lot of the -- did electronic recording of those mortgages that is -- with the local counties as opposed to having all that information passed between the settlement agent and the county through the couriers and things of that nature, to really send that information electronically, including payments and things of that nature, just to make that more of an efficient process and really start to build out the closing end of that workflow and help electronify and start to stitch that together. And you then saw us in 2020 purchase Ellie Mae, which, again, was more sort of in the loan origination or the origination component of the workflow, and again, starting to extend the network that we have. And then, of course, more recently, Black Knight, which is, we'll call it, kind of more post trade, if you will, with servicing. And so today, we've got this foundation across that workflow within mortgage, within an asset class that, again, as we all know, is really inefficient, but at the same time, very big. And we think, together, we've got an addressable market of about $14 billion that we can go after. But today, we're only about $2 billion of that. And we do, though, have connectivity to almost, in some way, shape or form, at least 1 product relationship, if you will, with almost everybody in that ecosystem. So we've got a lot of opportunity to create new product, to upsell current product on those that are on the network today and cross-sell and things of that nature, and I think uniquely build solutions that address all these pain points and really stitch it together in a way that hasn't been done and can't really be done, unless you have all these assets under 1 roof. And so it's an exciting time for that, and again, in a really big asset class that, I think, we can really uniquely apply the blueprint we have applied to other asset classes to this and Mortgage.

Maybe getting more specific then and talking about you just had earnings and gave guidance. So talking about your 2024 outlook a little bit more here. How confident are you, in particular, your recurring revenue guide? And then what are the puts and takes in 2024? And how do we then think about 2025 and beyond?

So look, I think the guidance -- recurring revenue is a revenue stream, let's put it this way. It's an output of the sales, and it's an output of the attrition that occurs during the year. Let's get there. And look, as we look here today, we've got some good visibility into the sales that are going to be coming online and hitting revenue. Your attrition can always be a little bit tougher to gauge, particularly if it's M&A-related or something along those lines. But typically, the attrition that we have had has been customers just really renegotiating or geography, if you will, moving away from a higher minimum to a lower minimum but higher transaction fees. And so it's not that we're losing that customer. And so at the end of the day, I think we feel really good about that guidance we were sitting. I think flat recurring revenues within an environment like this is pretty good. And I think look at -- when we -- as we move into a more normal environment because we've been able to retain these customers and because we're going to continue to innovate and create new products and cross-sell that core network, I think we're going to be in a much better position as a result.

Perfect segue. I mean, you just kind of mentioned the business is still very cyclically depressed. So on the earnings call, you actually made some comments, specific comments, about the upside once things normalize. So first, maybe remind everyone about some of those numbers that you put out there and flesh that out a little bit more. But then also, there's the transactional recovery, but maybe coming back to the recurring side, how may that behave when we get into a better environment?

Yes, it's a good question. And it's good to clarify, too. So what we said was that in an environment where we had somewhere between -- the industry had somewhere between 7 million loans a year and 10 million loans a year, and 10 million has actually been the average if you looked over the last 30 years or so, 7 million would be sort of the lower end of what we've seen over that period of time. And so we looked at that and looked -- if we were to revert back to that environment, and we looked at it as if we were in that environment in 2023, what would those transaction revenues look like? And we -- the output, if you will, from that was that we would have been about $200 million or so, a couple of hundred million dollars, so close to $0.5 billion better. And that really doesn't account for, look, I don't know that we'll get there this year, but certainly, we continue to add new customers to the platform. Current customers are buying new products. So it doesn't account for any of that. That's more than likely going to be occurring between now and when we do get to that environment. It's really just as if we were in it in 2023. To your question, it also didn't really include any benefit that you might get from recurring revenue, which wouldn't necessarily directly relate to that 7 million to 10 million or that reversion to that mean. But you certainly would think, and we do, that in that healthier environment, that more normal environment, people are going to be investing in product. They're going to be adding new kinds of products and things like that, that ultimately would be very helpful, I think, to the recurring revenue. Because all of these products have both a recurring component to them and a -- pretty much all of them, have a recurring component and a transaction component to them. So I think it would be beneficial, although I don't know that you see it. In the first quarter that we start to revert to those levels, it takes a little bit more time for recurring revenue, subscription revenue. But I do think that, that's an area of the business that would certainly benefit when we get back there.

One of the things in that business from the beginning, since you've expanded to the Mortgage segment, is getting into larger client segments. So I think you get grilled basically every quarter, like, hey, how about larger banks coming and outsourcing more of their own technology? So maybe you can talk about that pipeline, maybe both from new deals but also the existing deals you already made that are still not in the run rate yet.

Sure. So yes, 1 area that ICE legacy's ICE Mortgage Technology, and probably better said, Ellie Mae, before we acquired it. One channel within the origination ecosystem that was difficult for them to penetrate was really the mid-sized banks, larger banks, banks really in general. But really, those ones in particular that either were on their own technology or on another third-party technology. But since our acquisition of Ellie Mae, and certainly, since our acquisition of Black Knight, although it's even just 5 months in here, we started to see that change. And I think it's -- look, it's 1 is -- and we thought this with the Ellie Mae acquisition to a degree, too, the relationships at ICE, where, certainly, we know a lot of people across a lot of different asset classes would be something that could be helpful there in terms of helping get that across the finish line, if you will, with a lot of those customers. We're also seeing that with the Servicing business that we now have. There's a lot of attraction with the vision or to the vision that we have of integrating those platforms, that being the loan origination system and the servicing platform, as well as all the other data and analytics around it, that a lot of these banks and other customers, too, are increasingly attracted to. And of course, ICE has a track record of doing this in other asset classes. And so there's a confidence and belief that, that will be the case here that we'll do what we say we're going to do. And so I think that's 1 thing, too, that's helping really shift a lot of people towards thinking about us as a potential vendor and obviously pushing people across the finish line, eventually. And you've seen some really good success there, part of some of the revenue synergies we had and some of the other wins that we've had, frankly, too. But again, we're not customers that previously really would have entertained, I think, under the legacy owners.

Let's actually talk about synergies from the BK idea a little bit more. I mean, it looks like from the last quarter, it seems like it's off to a very good start. So maybe just remind us a little bit about pacing of revenue and cost synergies. And then, importantly, looking back, there's been upside to some of those targets and on prior deals. So maybe just help us where those -- where that upside could come from, if there is upside.

So yes, look, I think we are off to a really good start here. On the revenue synergy side, we talked about $30 million signed so far, which, 5 months in, to get to about 1/4 of what the $125 million target or so that we've set, I think, is pretty impressive. And again, it's a testament too, to, I think, this platform coming together and our customers embracing that vision and wanting to get on that platform as we kind of move forward here. And so that's certainly been something that's helped, both on the servicing and origination side, as I thought about that. So we're happy about that momentum. We thought about revenue synergies when we underwrote the deal probably being more material, if you will, being towards the end. I think that may have been a year or so ago where I was asked a similar question and mentioned sort of that hockey stick shape, so call it, sort of end of year 3, 4, and 5 kind of. But certainly, we've made some good progress here, so we're encouraged and excited about that. On the expense side, we got target about $200 million. We think, by the end of this year, we can hit $135 million annualized run rate. That's a little bit higher than the $100 million that we initially had targeted when we talked about the deal or announced the deal initially. So obviously on a good track there. And I think, look, you tend to find additional synergies as you bring businesses together that maybe you didn't recognize previously. But we are still only 5 months in. We did have a fair amount of time before close to really plan and get ourselves organized to really hit the ground running. I think that's a lot of what you're seeing in that $135 million versus the previous guidance, if you will, of $100 million. So we're definitely encouraged by that and well on our way to that $200 million target. But I don't think I'll provide you any kind of further updates than that here today. But it's certainly been a good start.

Fair enough. Getting maybe away from the revenue side. Since you are the CFO, we should talk about expenses a little bit. But look, you just gave guidance, so I'm not sure what else there is to say around that. But maybe from a long-term expense philosophy, you can remind us how we should be thinking about it. And then related to that, of course, I think you mentioned investing a few times. So maybe what are the biggest investment areas over the next couple of years you're thinking about?

Yes. I think look, I think we've always done a good job running an efficient business, being very thoughtful about that, trying to leverage existing infrastructure or resources when we do have new product ideas. And the overarching philosophy of build it once, sell it many times certainly permeates throughout the organization in that way. Over the last couple of years, we've done some things to really manage the compensation expense, really, kind of was helpful during the more inflationary periods, if you will, that we were able to manage against. And we did that by really moving people to lower-cost locations and expanding manager scope and things of that nature and just really running more efficiently and effectively while not sacrificing investment. And so I think you'll continue to see us do that and approach things that way. And I think more recently, certainly, mortgage is going to be an area where we are committed to making some significant investments over a multiyear period. We've talked about a couple of hundred million or so, again, over a long period of time to really enhance the technology that we've recently acquired and really to stitch all of that together in a way that I think is going to be really unique for the industry, as I've said. So that will be a focus of ours. But we've got other areas of the business as well across Fixed Income, across our Exchange business, where we're always looking to really improve the underlying technology and make sure that we've got the best product possible at the end of the day. The other thing that we are looking at that I think is still pretty early stage, I think you've heard some others talk about it, too, but just how artificial intelligence can be applied more as a productivity tool for people, whether it's on the engineering and developing side or compliance and things of that nature. Those are things that we're very much looking at. We've got a team that's dedicated, that's kind of looking across the group how we can leverage a lot of these models in different ways across the organization. And so that's something that -- I think, again, it's very -- it's much still early days on that front, but certainly, there could be some productivity gains that are -- that come with something like that in the years to come as well. So an investment for productivity and growth is always a good thing, and that's ultimately what we're focused on.

Great. And then maybe just finishing on capital. You're clearly in deleveraging mode right now post BKI. So maybe just remind everyone where you are and what your targets are, what the timing is to get to where you want to be. And then, of course, I guess, what's next? So how should we be thinking about buybacks? And of course, with ICE, you always got to wonder about M&A.

So we're at 4.1x to end the quarter. We started a little over 4.25x when we announced them and ended the first quarter in September -- or third quarter in September, first quarter, the deal. And so we've done -- we paid down $1.4 billion or so since. And so we're moving towards that target of 3.25x, which is where we can start to return capital through share buybacks. We do have a target of 3x ultimately. So we still want to get there ultimately. But certainly, once we get to that 3.25x, we've got some optionality that we could use with that. And so I think in 2025 is really when we're thinking we can get there, somewhat dependent, if you will, on within 2025 on cash flows today and cash flows tomorrow. But certainly, you can see we've got -- in terms of what's out there publicly, we had a good start to the year on the Futures side and on the Exchange side, so that certainly feels good. And those are really -- those are the money makers, if you will, the cash flow-generative businesses today. So that all feels good and feels like we're on a good track there. I think it's important to note, too, though, and because of the strength and the diversity of the cash flow that I think that we have, just because we're in that deleveraging mode doesn't mean we haven't been able to find smaller bolt-on things. You saw us do risQ and Urgentum while we're deleveraging from the Ellie Mae transaction. So we did the SPSE acquisition shortly after IDC. So there have been times where we've done some deals, but ultimately, we will get to those leverage targets. We've always done that, and that's really the main goal at the end of the day. But we do have the flexibility to continue to grow inorganically as well when that opportunity arises.

Great. I see we have about a couple of minutes left. I know this is the last presentation, but I will open it to the room if there's anyone who has a question or wants to ask.

Everybody's tired. Long week.

I mean, it's -- I've done 5 firesides, and there haven't been any questions. So I think it's par for the course. But look, we have a minute left. Maybe just 1 follow-up. And maybe this is a bigger picture question again, which is how we started, too. But like maybe you can just talk about you have 3 segments now. And I think sometimes people don't really see the synergies between those businesses and viewed them pretty distinct. And if I look at your stock over the last few years with all these expansions you've made, some people would argue the multiple has come down, maybe they don't see the value of the combination. So maybe, one, you can just tell us why this stuff fits together the way it is. And if the value that some people see doesn't get recognized or that you see, like is there actually room to divest any business or divisions?

So I think it's important because I think it's been -- ICE is a company and a stock, therefore, in this case. But that certainly has evolved quickly and certainly into new asset classes that, I think, legacy shareholders, if you will, it takes time to go learn what we're doing and understand it. And it's sort of, as a result, it takes a little bit of time. But I think, ultimately, we've created value over that -- this period we've been in existence, and we'll continue to. And it's because of that blueprint that I really started out with and the philosophy that we had and trying to take those core competencies of data, technology, being able to run or operate efficiently and applying them to different asset classes and adjacent opportunities. And Jeff, I think when he started, I know he started the company, he wasn't -- he never thought we would just be an energy futures platform. He always sort of saw those core competencies in areas that we can leverage into adjacent asset classes and adjacent opportunities, and you've seen us do that pretty successfully. And if you really look at all those assets and how we've done it, it's pretty similar in that sense. And so now as we sit here today with all of these -- across all these asset classes, certainly, the benefit of it has been some diversity and some cash flow that has enabled us to continue to invest even when things are tough in certain areas. But also, as an opportunity to really cross-pollinate, if you will, across the organization. And so you've seen us recently take a lot of the raw data that exists on the mortgage platform, that Black Knight and Ellie Mae really weren't able to kind of harness, use the expertise we have in data services to prioritize some of this stuff, create indices out of them and launch futures products and also create better prepayment models for the capital markets, for instance. You've seen our -- take our carbon markets and create global carbon indices that ETFs are now licensing. So there's a lot of different kind of opportunities across the business that wouldn't be possible if they weren't under all under 1 roof. And I think, really, at the core of it all is that technology and the operations groups that we have that, again, are sort of the shared services, if you will, across our platform that really enable us to kind of do that. And there's a lot of stuff that we've learned when we migrated off of LIFFE that we used to do the replatforming of the New York Stock Exchange and the Pillar technology that I talked about earlier. And a lot that we learned there that we then applied to the migration that we did with IDC and moving off the mainframe and improving that platform and that product. And there's a lot that we've learned across all of that, that we're going to apply and are starting to apply in a lot of the enhancements we're going to do, not only to Black Knight and some of their products, but even still the Ellie Mae products and really make that a lot better. So there's a lot of that, that exists across ICE that I think maybe doesn't get fully recognized. But again, it is a situation where a lot of these things couldn't be done if we weren't all together kind of under 1 roof in that way.

Excellent. I think that's a great place to end. Warren, thanks for coming down here and ending this conference with a great conversation. That's it.

Great. Thank you.

Thanks, everyone.