Intercontinental Exchange's mortgage technology business lost money for the ninth consecutive quarter on a GAAP basis, with operating revenues relatively flat compared to prior periods since the company completed the Black Knight acquisition.
ICE Mortgage Technology posted revenue of $508 million for the fourth quarter, compared with $509 million in the period ended Sept. 30, 2024 and $502 million one year earlier.
Its fourth-quarter revenue was slightly above the high-end of the company's guidance, noted Warren Gardiner, Intercontinental Exchange's chief financial officer, on the earnings call. The recurring portion was $391 million.
Its improvement in recurring revenues was somewhat offset by some clients who renewed their Encompass loan origination system licenses at lower minimums; Gardiner did note that most clients did renew at a higher minimum.
"While down on a year-over-year basis, revenues improved relative to the third quarter, driven by growth in both our servicing solutions and our data and analytics business," Gardiner said.
Transactional revenues of $117 million was up 12% year-over-year; they were
The fourth quarter of 2023 was the first full quarter that the Black Knight businesses ICE was allowed to keep
That explains the growth in full year revenue, to $2.02 billion from
Using generally accepted accounting principles, ICE Mortgage Technology lost $36 million, an improvement over third quarter losses of $54 million and fourth quarter 2023 losses of $74 million.
For the full year, it lost $170 million, compared with $276 million for all of 2023.
But that pro forma number provides some insight into how beneficial the Black Knight purchase has been. Full year operating income for the mortgage technology was unchanged at $724 million.
Rather than operating losses for those nine three-month periods, ICE Mortgage Tech has been profitable on a pro forma basis, at $177 million for the fourth quarter. That compares with $181 million in the third quarter and $193 million during the year ago period.
"We continue to see signs of market stabilization as housing inventory continues to rise, up 20% in 2024, and annual home price appreciation slowed to the lowest levels since 2011," Gardiner said.
For this year, the company anticipates total mortgage technology revenues will grow in the low single-digit to mid-single-digit range.
"The high end of the range is underpinned in part by low-teens growth in industry origination volumes, which is similar
"It's worth noting that in just 16 months following the close of Black Knight, we have achieved run-rate expense synergies of $175 million and now expect to reach our full synergy target of $200 million by the end of 2025," he said. "In addition, we are also raising our Black Knight expense synergy target to $230 million."
ICE Mortgage Technology added 38 Encompass clients in the fourth quarter, said Ben Jackson, Intercontinental Exchange president.
"And to kick off the year, we're pleased to announce that Flagstar and Howard Hanna have signed on as Encompass clients," said Jackson, who is also chairman of ICE Mortgage Technology.
However, Gardiner said ICE Mortgage Technology is expecting attrition from
"That's probably 0.5 [percentage] point in terms of an impact on our growth rate," Gardiner said.
As the company has discussed during the past year, it is also facing headwinds when it comes to Encompass renewals, related to the 2020 and 2021 vintages, Gardiner said.
