The mortgage technology unit of Intercontinental Exchange
A sluggish mortgage lending environment, punctuated by volatile interest rates and consolidation, continues to plague many in the business and impacted ICE's results, its leaders said. The average 30-year fixed rate crossed over the 7% threshold this spring, running counter to early-year predictions.
"What's unknown, and what we're just watching closely is that just given how fast rate expectations changed, a lot of our market participants want market stability and want a view as to when they're going to get return on investments," said Intercontinental Exchange President Ben Jackson during the company's earnings call.
"So we're watching closely to see our sales cycles go in to potentially lengthen," Jackson also serves as chairman of ICE Mortgage Technology.
The
"After factoring in the dramatic shift in interest rate expectations for 2024 relative to just three months ago, we now expect total revenue growth in our mortgage technology business to be flat to down in the low single-digit range with revenues unlikely to improve materially from the first-quarter levels until the second half," said Chief Financial Officer Warren Gardiner.
ICE Mortgage Technology's latest results were based off of $499 million in revenue, just off $502 million in the fourth quarter, but up 111% on an annual basis from $236 million.
Recurring revenue edged down to $390 million compared to $397 million at the close of the previous quarter. Transaction-backed revenues totaled $109 million, nudging up from $105 million.
"Recurring revenues were impacted by both industry consolidation and continued pressure on renewals within our origination technology business," Gardiner said.
Indicative of the financial pressures companies are facing, "some percentage" of customers were opting to renew with lower minimums and subscriptions, but they tended to be made up for in other costs, Jackson said.
"The trade-off there is consistently a higher per-close loan fee," he noted.
By segment,
Although the business forecast may remain subdued in the short term, company leadership celebrated several of
"This service is an intuitive and conversational new interface, leveraging natural language processing for our servicing system designed to streamline workflows, increase efficiencies, and expedite training of new servicing personnel," Jackson said.
The company also said it was pleased with the growth of new clients and the success it found in bringing on existing customers of one product to another platform, allowing it to provide front-to-back origination-to-servicing technology. Among new Encompass users coming from the existing MSP client base were Citizens Bank and Webster Bank. ICE added 20 new Encompass clients during the quarter, company officials said.
"On MSP, we have a record number of clients that are on MSP with 94 clients, and we have 13 clients that are going through implementation. Many of these are ones that we've announced since we closed on Black Knight," Jackson also said, adding that the full financial impact from some of the new customers would not be felt until later in the year.
On a company-wide basis, Intercontinental Exchange, which also operates a fixed income and data services business, as well as the New York Stock Exchange and related trading units, posted a net quarterly profit of $767 million.
