Black Knight 4Q earnings are down 71% compared to previous year
Black Knight’s fourth quarter net earnings fell 71% year-over year. This was largely due to the slowing mortgage market. However, Black Knight reported $452.5 million net earnings for the 12-month period. This is an increase of $207.9 million from 2021. In a flash note following the earnings release, Ryan Tomasello, an analyst from Keefe, Bruyette & Woods, stated that “market commentary struck a downbeat tone about client demand and attrition.” “However management acknowledged that it remains optimistic about long-term growth opportunities in spite of near-term headwinds. Black Knight did not hold a conference call due to the imminent merger with Intercontinental Exchange. But the results release came the day after a published report that the Federal Trade Commission is expected to file a lawsuit to quash the transaction.Investors on Tuesday morning continued to drive Black Knight’s stock even lower. After closing Monday at $60.85, it opened at $59.67 per shares. According to Yahoo Finance, Black Knight was trading at $59.42 by 11 a.m. In a Monday night note, Tomasello stated that investors had already priced in the possibility of an FTC suit. This was evident by the deal spreading widening by 3.9% on the news to 35.8%. He wrote that the future stock price will depend on how the two companies respond to the roadblock. “While it may take several weeks to get clarity about that front after the formal filing of a suit, we reiterated our base-case assumption ICE would continue to pursue the merger (vs. a market implied closing probability of approximately 30 Tomasello), and that the deal has a greater than 50% probability of closing. Black Knight Executive Chairman Anthony Jabbour stated in the press release that he was pleased by the company’s fourth quarter performance and full-year performance. Jabbour stated that “despite a very difficult time for the markets which we serve, and our proposed transaction with Intercontinental Exchange,” the company’s full-year revenues were $1.55 billion in 2022, compared to $1.48 billion in 2021. Joe Nackashi, CEO, stated that organic revenue growth was 4% for the year. This demonstrates the sustainability of our business model. We remain focused on gaining new clients, expanding our relationships with existing clients through cross-sales and contract renewals, and delivering innovative solutions. The fourth quarter revenue decreased by 1% year-over-year to $383.5million. Its servicing software revenue increased 2% thanks to new Black Knight clients and cross-selling products with existing customers. It also benefited from higher foreclosure revenue and contract termination fees. However, the origination software revenue grew 2% from new Black Knight clients as well as cross-selling products to existing customers. ICE Mortgage Technology previously reported a $6million operating loss for its fourth quarter due to the continuing contraction in originations.