Ahead of a potential merger with rival Intercontinental Exchange Inc., mortgage tech giant Black Knight reported slimmer profits in the second quarter and slowing organic growth.
The company’s profit dropped nearly 90% from the previous quarter’s $364.6 million due to a gain on the investment in credit report services company Dun & Bradstreet Holdings, according to the earnings report released Thursday. The firm’s net earnings rose 1.5% from $39.7 million from the same period in 2021.
Black Knight’s revenue in the second quarter climbed to $394.5 million, a 9% increase from the same period in 2021. But organic revenue growth slowed down to 7% from April to June, in line with the firm’s expectations of a downturn in the mortgage industry. Black Knight CFO Kirk projected late last year that organic growth would likely fall between 7% and 8% in 2022 as lower mortgage origination volume chills demand for the company’s data and analytics products..
Revenue for software solutions came in at $339.4 million, which was 86% of the total revenue in the second quarter. Operating margin for that segment declined slightly to 45.6% from 2021’s second quarter of 46.4%. The remaining revenue of $55.1 million came from data and analytics, with an operating margin of 24.9% compared to 30.6% in the same period in 2021.
“Our core performance in the second quarter was consistent with our expectations and highlights the ongoing strength and resilience of our business as we continued to expand and extend our relationships with existing clients through cross-sell and contract renewals, win new clients and deliver innovative new solutions,” said Anthony Jabbour, executive chairman of Black Knight.
Black Knight is preparing to be acquired by Intercontinental Exchange Inc. (ICE), assuming regulators don’t stand in their way. In May, ICE said it entered into a definitive agreement to acquire Black Knight for $13.1 billion, which valued Black Knight at $85 per share.
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Two challenges quickly emerged following the announcement of the deal between the two giant suppliers of mortgage loan origination software – whether ICE could convince regulators that the acquisition of Black Knight will not harm competition in the mortgage tech solutions market and whether ICE could get approval from Black Knight’s shareholders.
According to a 10-Q filing with the SEC on Thursday, ICE said the transaction is expected to close in the first half of 2023 following the receipt of regulatory approvals and the satisfaction of customary closing conditions.
On July 22, ICE filed an amended proxy statement/ prospectus with the SEC, which is under review by the commission. According to the filing, the board of directors of Black Knight and ICE unanimously approved an agreement for ICE’s acquisition of Black Knight.
“ICE is expected to issue about 22.2 million shares of ICE common stock in the aggregate in the merger,” the filing said.
Because of the proposed transaction Black Knight said it suspended providing forward-looking guidance and would not host a conference call related to its second quarter earnings release.
Black Knight’s stock which was trading at $65.32 around 1 p.m. on Thursday, up from the previous close of $64.17
