While ICE Mortgage Technology posted a much larger operating loss in the third quarter, it was profitable using a non-GAAP metric that assumes it has owned Black Knight since 2021.
The transaction closed on Sept. 5, and subsequently in separate deals, Intercontinental Exchange had to sell the Empower loan origination system and Optimal Blue to units of Constellation Software.
"With our acquisition of Black Knight, we've again undertaken a blueprint to wrap its legacy technologies, tie it to our mortgage platform for near seamless integration with our customer base and rebuild its tech stack with a modern architecture over the coming years," Jeff Sprecher, Intercontinental Exchange's chairman and CEO, said on the company's earnings call.
ICE Mortgage Technology posted an operating loss for the fifth time in the last six quarters, at $157 million for the most recent period. This compares with a loss of $17 million in the second quarter and a profit of $6 million for the third quarter of 2022.
But using that non-GAAP metric, adjusted pro forma operating income, ICE Mortgage Technology had profits of $172 million, versus $187 million in the second quarter and $212 million one year ago.
In its last period as an independent company, Black Knight earned $55.3 million for the three months ended June 30, while in the third quarter of last year, it had net income of $30 million.
Third quarter revenue was $330 million, including $87 million that can be attributed to Black Knight. Approximately $235 million of that was from the recurring sources ICE Mortgage Technology had sought with the acquisition.
For the same period last year, total revenue was $276 million, but a lower share, $163 million, was from recurring business.
Adjusted operating expenses totaled $812 million, including $56 million related to Black Knight, while adjusted non-operating expenses totaled $114 million, including $41 million of incremental interest expense related to the acquisition.
"In the third quarter, our mortgage business once again outperformed the broader industry that experienced a nearly 20% decline in origination volumes," Ben Jackson, president of Intercontinental Exchange and chair of ICE Mortgage Technology, said on the earnings call. "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."
In a post-closing call held on Sept. 28, Intercontinental Exchange executives stressed the cross-sell opportunity created with the addition of Black Knight.
This already bore fruit in October, management declared. M&T Bank, which is an MSP customer, signed onto Encompass, while Fifth Third Bank, an existing ICE Mortgage Technology customer, will switch to MSP and purchase several data and analytics products.
Other new MSP customers that had previous ICE Mortgage Technology ties are Black Hills Federal Credit Union and Mortgage Solutions of Colorado.
